TUCSON, AZ (April 2, 2026) — As commercial real estate deal activity picks up again, another cost is drawing greater attention in the underwriting process: legal fees.
A recent GlobeSt. report points to legal expenses as one of the fastest-rising costs tied to commercial real estate transactions, adding new pressure at a time when owners, investors, and developers are already grappling with higher construction costs, insurance premiums, taxes, and utilities.
The trend reflects a broader surge in law firm performance. Citing data from The American Lawyer reported by Above the Law, GlobeSt. noted that in 2024 the bottom half of the Am Law 200 posted an 8.5% increase in average revenue per lawyer, an 11.1% rise in average gross firm revenue, and a 12.8% jump in profits per equity partner.
In real estate, those rising legal costs can materially affect the economics of a transaction. Crexi reported that closing costs alone can range from 2% to 5% of a property’s value, and in some cases, more. As property values and transaction volumes increased through 2025, those expenses rose in tandem. GlobeSt. also cited Altus Group data showing annual median transaction prices climbed by more than 10% in each quarter of 2025, further increasing the cost burden attached to closings.
When due diligence, contract negotiations, lender documentation, and entity structuring are layered in, legal fees can quickly become a meaningful drag on margins.
To address that, more firms and clients are turning to alternative fee arrangements, or AFAs, instead of relying solely on hourly billing. GlobeSt., citing the Magazine of the Association of Legal Administrators, reported that AFAs have been steadily gaining traction for more than 15 years as clients seek more predictable costs and greater alignment between fees and outcomes.
That predictability has become especially important for operators working with tighter margins. GlobeSt. quoted David Helbraun, founder of New York-based Helbraun Levey, which represents restaurants, bars, and hospitality groups, as saying restaurant owners are accustomed to budgeting carefully, and that unpredictable legal costs can create real anxiety. He noted that restaurant profit margins, once at 15% or more, have narrowed to 10% or less amid rising labor, food, and occupancy costs.
The same pressure is being felt across commercial real estate transactions more broadly. GlobeSt. also quoted Arun Singh, founder of SPE Specialists, a consulting firm focused on special purpose entities in CRE, who said that even simple deals are now materially more expensive to close than they were in prior years. According to Singh, there are few deflationary forces left in the transaction process, and most services associated with deal closings have become significantly more expensive.
That cost escalation is helping drive wider use of flat-fee legal structures in transactional work. Raul Gastesi, partner and co-founder of Gastesi Lopez Mestre & Cobiella, told GlobeSt. that deals are often structured with half the fee paid up front and the balance due at the end. While some firms still monitor hours and may revisit pricing if a deal becomes more complex than expected, he said, more transactional attorneys are quoting flat fees rather than billing strictly by the hour. Litigation, he noted, remains more commonly billed on an hourly basis because of its unpredictability.
For commercial real estate professionals, the message is clear: legal fees are no longer a minor closing expense. In a market where margins remain under pressure and pricing discipline matters, pricing discipline is becoming an increasingly important factor in how deals are structured, negotiated, and evaluated.
Source: GlobeSt., March 31, 2026