Dreams of Shreds and Tatters

Lovecraftian urban fantasy, but it's Lovecraft with all the worst exceses taken out. Beautifully written and brilliantly paced.

When Liz Drake's best friend vanishes, nothing can stop her nightmares. Driven by the certainty he needs her help, she crosses a continent to search for him.
She finds Blake comatose in a Vancouver hospital, victim of a mysterious accident that claimed his lover's life--in her dreams he drowns. Blake's new circle of artists and mystics draws her in, but all of them are lying or keeping dangerous secrets. Soon nightmare creatures stalk the waking city, and Liz can't fight a dream from the daylight world: to rescue Blake she must brave the darkest depths of the dreamlands. Even the attempt could kill her, or leave her mind trapped or broken.
And if she succeeds, she must face the monstrous Yellow King, whose slave Blake is on the verge of becoming forever.