Legal Fees Become the Next Big Cost Driver in CRE Deals Article originally posted on Globe St. on March 31, 2026 Commercial real estate deals are getting bigger again — and so are the legal bills that come with them. After a widespread drop in property valuations, transaction volumes have rebounded, pushing costs higher across the board: from construction and insurance to taxes and utilities. But few line items have risen as sharply as legal fees. Soaring legal costs aren’t just a trend in real estate. They mirror a broader boom in law firm revenue. In 2024, the bottom half of the Am Law 200 largest U.S. firms saw average revenue per lawyer climb 8.5%, average gross firm revenue rise 11.1%, and profits per equity partner jump 12.8%, according to data from the American Lawyer cited by Above The Law. Legal work can quickly inflate deal costs, especially for larger transactions. As Crexi notes, closing costs alone can run from 2% to 5% of a property’s value—and sometimes more. When the Altus Group found that annual median transaction prices rose more than 10% each quarter of 2025, closing fees moved in tandem. Add due diligence or negotiation services, and the total can eat into profit margins. To rein in spending, more firms and clients have turned to alternative fee arrangements (AFAs), a trend growing steadily for over 15 years, according to the Magazine of the Association of Legal Administrators. Rather than billing solely by the hour, AFAs are designed to align costs more predictably with outcomes, reducing incentives for inefficiency. For some owners, predictability is now paramount. “Restaurant owners are used to operating with budgets,” David Helbraun, founder of New York–based Helbraun Levey, legal representatives for restaurants, bars, and hospitality groups, tells GlobeSt.com. “The unpredictability of legal costs causes owners anxiety; they fear easily blowing their budget and facing a cash pinch. For restaurant operators, hourly billing has become increasingly challenging due to tightening margins. It used to be that 15% was the average profit margin of restaurants; now it’s 10% or less due to rising labor, food, and lease costs.” Arun Singh, founder of SPE Specialists, a consulting firm focusing on special purpose entities in commercial real estate, says those pressures extend to nearly every part of a transaction. “Just the simplicity of the average deal is more expensive; closing costs are materially higher than they used to be,” Singh tells GlobeSt.com. “There are almost no deflationary forces in real estate transactions today. Most services tied to a deal closing have become significantly more expensive.” That escalation has helped alternative fee structures gain traction. “Typically, it’s structured with 50% of the fee up front and 50% at the end,” says Raul Gastesi, partner and co-founder of law firm Gastesi Lopez Mestre & Cobiella. “Some firms will still track their time and revisit the arrangement if a deal becomes more complicated than expected, but I rarely do that. Across transactional work more broadly, more attorneys are quoting flat fees instead of hourly. Litigation is different, where it’s usually hourly because it’s too unpredictable.”