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REFLECTING tightening office supply in Singapore, the vacancy rate for Grade A office buildings dipped further to 2.7 per cent in the second quarter - the lowest level in about five years, according to CB Richard Ellis (CBRE).

Boomtown: Traditional office sub-markets in the core central business district such as Marina Centre, Raffles Place and Shenton Way all enjoyed single-digit vacancies

The figure in the first three months of this year was 4.9 per cent.

CBRE also said yesterday that the vacancy rate in the core central business district (CBD) - Shenton Way, Raffles Place and Marina Centre - fell from 9.5 per cent in the first quarter to 7.1 per cent in Q2. 'The improvement in overall occupancy levels was led by strong leasing momentum in both prime and Grade A office buildings,' it added.

Traditional office sub-markets such as Marina Centre, Shenton Way, City Hall and Orchard Road all enjoyed single-digit vacancies in the April-June quarter. Quality space outside the CBD was also highly sought after, with Tampines and Jurong East regional centres, as well as the Thomson/Novena locations, reporting vacancies of around 2 per cent. In the River Valley area, the figure was 6.5 per cent.

CBRE also notes that new supply of office space from the second half of this year to 2010 will average only 600,000 square feet per annum. 'Office take-up is projected to be above two million sq ft for 2006, and with tenant demand expected to remain strong, the limited supply over the next five years could start to impact occupiers' ability to accommodate space expansion,' it said. 'Tenants looking for CBD space may have to compromise their preferred location, whilst having to face higher rents across all office grades.'

Rival property consultancy group Jones Lang LaSalle predicts that prime Grade A rents in Raffles Place - which rose 15-16 per cent in the first six months of this year from end-2005 levels - are likely to increase a further 15-20 per cent by year-end, bringing the full-year increase to 30-40 per cent.

CBRE said average Grade A monthly rent rose 13.3 per cent quarter-on-quarter to $6.80 psf in Q2.

Separately yesterday, CBRE said it was named the leading brand in commercial real estate for the fifth year in a row, in a survey of real estate professionals worldwide. The survey was conducted by The Lipsey Company, which provides training and professional development services to the commercial real estate industry.