Many commercial-property landlords here are offering rent concessions in the form of reduced rates or periods of free rent to attract and retain tenants, who are shopping the market and willing to move for better deals or more desirable space, some leasing agents here say.

Mark McLees, senior sales and leasing broker with commercial real estate brokerage NAI Black, of Spokane, estimates that about two-thirds of landlords have been willing to adjust rents in recent transactions.

Some holdouts, though, have had to reject offers from potential tenants because of lender restrictions, McLees says.

"The end result for the holdouts has been that approximately 10 to 20 percent of them have been able to land the perfect tenant," McLees says. Much of the rest of the holdout space has remained vacant, in some cases leading to foreclosures on commercial properties, he says.

McLees says he's met with each of his landlord clients and provided them with information on recent comparable lease transactions, and some landlords have adjusted rates to remain competitive.

Tenants for such leases he's been involved with include Columbia Bank, the FBI, and Spokane College of English Language, all of which have moved downtown from other locations.

Some landlords have reduced their office lease rates by up to 40 percent and retail lease rates by up to 25 percent, McLees says.

The spring 2012 survey of competitive office space shows that recent annual rents here, which don't reflect free-rent incentives, averaged $19.58 a square foot for Class A office space downtown. That's a slight increase over a year earlier, but far below spring 2010 and 2009 levels in which new annual leases were reported at averages of $23.23 and $24.59 a square foot, respectively.

The twice-annual survey is conducted by Spokane real estate appraisal firm Auble, Jolicoeur & Gentry with participation fromcommercial real estate companies Kiemle & Hagood Co., NAI Black, and Goodale & Barbieri Co., all Spokane based.

The survey shows the vacancy rate for Class A office space downtown was 8.7 percent, down from 9.11 percent a year earlier.

Mike Livingston, associate broker at Kiemle & Hagood, says overall Class A office vacancy rates have remained relatively flat over the last three years.

That apparent stability, though, has come at the expense of midpriced Class B and lower-rent Class C properties, Livingston says.

The Class B vacancy rate downtown was 23.3 percent in the spring survey, up from 18.6 percent a year earlier, while the lower-rent Class C space downtown was 27.1 percent, up from 21.8 percent a year earlier.

"If you're a landlord of an inferior building, it's tough competing on price only," Livingston says. "If it's a nicer building, (competition) isn't quite as dramatic."

Among tenants that are staying put, many have negotiated lease terms called "blend and extend," he says.

"Companies say they could use some rent relief in exchange for extending their leases," Livingston says.

Livingston also says some landlords who might be willing to lower rent to recruit or retain tenants are prohibited from doing so by their lenders.

Reducing rent lowers the value of the property, which reduces collateral against financing, he says.

To avoid lowering property values, many landlords lower the overall rent by offering a period of free rent as an enticement to attract or retain tenants, rather than lowering annual lease rates, Livingston says.

"Tenants don't care how they reduce rent expenses," he says. "For an owner of a building, however, it can be a big deal."

Livingston says some tenants are shopping the market for nicer space.

"That's a continuation of a trend that started a few years back," he says. "Tenants, especially from outside of Spokane, are saying they don't mind paying the freight for nicer space."

Livingston is the leasing agent for the 250,000-square-foot former Agilent building, at 24001 E. Mission, in Liberty Lake, where a subsidiary of Liberty Lake real estate development concern Greenstone Corp. is developing the Meadowwood Technology Campus.

Boston-based Liberty Mutual Group Inc. leased nearly half the building and moved there from another Liberty Lake location.

Other tenants that moved into that building are Providence Health & Services, which is consolidating its billing and collection services there, and Demand Energy Networks. Those companies are occupying a combined 50,000 square feet of space there.

Spokane Valley's spring office vacancy rate, at 19.4 percent was down from last year's rate, although it's been chronically high for many years.

Worthy Enterprises LLC, which owns the River View Corporate Center, a Class A office building at 16201 E. Indiana, has filled 30,000 square feet of office space with new tenants within the last year, says Jack Marr, the center's leasing and property manager.

The 250,000-square-foot RVCC building, which opened in late 2008, is now 46 percent occupied, Marr says.

Recent tenants, which include Wells Fargo Dealer Services, Progressive Insurance Casualty Insurance Co., and Opportunity Medical, moved there from other locations, he says.

"They're looking for a better deal," he says. "I don't think there were many expansions."

RVCC competes in the office market by offering some free rent and tenant improvements, including phone infrastructure.

With such incentives, tenants can recover the cost of moving quickly, Marr says.

Although the Valley has shown some improvement in the office lease market, Marr says that has more to do with companies moving there from within the Spokane area than with attracting new businesses to the area.

"I think it's just more of the same; people looking for deals," he says.