It’s not just affordable homes that have gotten hard to find in Southern California’s real estate market. The competition among Los Angeles law firms for attorneys with real estate experience has turned into an all-out war.

In just the last few months, two real estate lawyers have been plucked from Paul Hastings Janofsky & Walker LLP by Greenberg Traurig LLP. A handful of real estate lawyers were taken from Pillsbury Winthrop Shaw Pittman LLP to start Goodwin Procter LLP’s Los Angeles office. And real estate boutique Van Etten Suzumoto & Beckett LLP was swallowed by Pittsburgh-based MaguireWoods LLP, a national firm looking for a share of L.A. real estate transactions.

Local attorneys contrast that with just a few years ago when there was no shortage of real estate talent. And the competition is not just between law firms seeking to bolster their real estate practices. Development and real estate companies are getting into the act too, poaching legal talent.

“You could have hung a sign from a 40th story window saying ‘Real Estate Lawyers Wanted’ just five years ago and your lobby would have been flooded with good candidates the next day,” said Robert Zeavin, managing partner of Steefel Levitt & Weiss LLP in Los Angeles, which recently lost a real estate attorney to a development firm client and is now searching for a replacement.

Last year set profitability records for law firms in the United States with seven firms exceeding $1 billion in profits. Top partners at some of those firms took home more than $2 million a piece. And in markets like Los Angeles real estate transactions played no small role.

Moreover, the 2006 market has continued at the same pace. And given the still torrid commercial real estate market in Los Angeles even as the residential market cools off the lateral movement of attorneys isn’t likely to slow.

A recent study by Menlo Park-based Robert Half Legal International Co. reported that 55 percent of U.S. law firms plan on hiring within the next 12 months, with just 1 percent of firms expecting to downsize.

“Now you need to use skywriting (to attract attorneys),” said Jonathan S. Gross, the new managing shareholder for Rutter & Gilchrist PC, who stepped up into his position at the real estate boutique because founding shareholder Paul S. Rutter has taken an executive job Maguire Properties Inc.

Sophisticated market

Most firms rely on legal recruiters for good candidates. But only a small percentage of them focus on “lateral partners,” lawyers with a stake in their firm and a book of business that would move with them, thereby generating more revenue for the receiving firm. These deals can involve entire departments, millions of dollars in business and sometimes take up to one year.

For Dan Hatch, who heads the partner practice in Los Angeles at Major Lindsey & Africa LLC, lateral hires in real estate practice have been a large segment of recent business, especially as transactions have become more sophisticated.

“The real estate market has been heating up for the last nine years,” Hatch said. “Real estate has increased in value so much. There are so many more ways that it can be sold or packaged on the market generally.”

Of course, “stealing” stars isn’t new. But Raphael Bostic, the director of USC’s Lusk Center for Real Estate Development, said the extended real estate boom has transformed the market.

“What has changed is the fact that real estate is hotter than ever, and so requires more expertise and depth. Moreover, these deals can be extremely lucrative. These factors have drawn the attention of leaders of law firms and made them more aggressive in developing their real estate-oriented practices,” he commented in an e-mail.

In the past, developers and real estate professionals have not historically been interested in paying the highest hourly rates for real estate lawyers. That translated into establishing a good market for the boutiques like Allen Matkins Leck Gamble & Mallory LLP and Cox Castle & Nicholson LLP, Hatch said.

There’s also room for larger firms, particularly on the finance side. Newly-arrived Goodwin Procter, for example, is a national firm with a formidable real estate practice. Firms like Gibson Dunn & Crutcher LLP and Sidley Austin LLP are also in the mix.

Cyclical boom

Legal recruiter Larry Watanabe of Watanabe & Nason LLC said many factors come into play when attorneys change firms, though resources and location are among the top issues, with many keeping a close eye on profitability rankings.

“People are interested in moving to firms that are profitable. And that is a factor in their decision-making process,” he said. “(But) partners move all the time because they feel their current firm has inadequate resources. People will leave a regional law firm setting for a firm with more resources available so that they can grow with their client.”

Still, Watanabe believes that the current spate of lateral recruiting may not be warranted by the market, given that in all probability the real estate market will cool.

“The real estate market has been quite hot over the last two to three years,” he said. “When the economy is good, bankruptcy lawyers aren’t busy, corporate lawyers are busy. Litigators are always busy. But when the economy goes down, bankruptcy lawyers are busy and real estate lawyers aren’t.”

Still, even though a slowdown is all but inevitable in even the commercial real estate markets, firms are doing all they can to bolster their practices while the markets are thriving.

“The economy’s terrific right now and the real estate market is terrific,” said Peter Weil, who heads the business department at Christensen Glaser Fink Jacobs Weil & Shapiro LLP.

The practice of the Los Angeles firm is working on a number of big projects, among them an MGM Mirage property on the Las Vegas Strip that will include a casino, condos and hotel. The attorneys are dealing with all matters of construction and development.

Weil said the secret to keeping the attorneys from being poached is providing interesting work that keeps them busy and happy. “Lawyers are smart people. If you have an exciting project, it’s something that challenges you, motivates you. It gives people an opportunity to be creative. It’s the quality of work,” he said.