Commercial real estate vacancy rates are on the rise in Washington, D.C., forcing landlords to seek ways of offsetting their reduced income when they lose tenants.

Ballard Spahr real estate attorney Kelly M. Wrenn said some landlords will have to take on new equity partners or pay higher interest rates for "rescue capital" such as mezzanine loans to make up the difference between the money they have and what they can borrow from lenders. "Rescue capital can be expensive, and the tension comes when owners of properties who are in this position are forced to take on equity partners," Mr. Wrenn said.

A growing number of law firms, including Ballard Spahr, and other companies have been moving into smaller, more efficient spaces to reduce their real estate costs, and landlords are responding by offering concessions or spending money to improve their properties.

"Firms like ours are looking to reduce their floor plates on a per-office basis, so the net effect is we lease less space," Mr. Wrenn said. "You reduce your rental dollars, you get a new build-out, and you get significant tenant improvement allowances. There will be more competition for office tenants, and there will be some pressure on landlords."

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