Speaking at Fund Selector Asia’s alternatives forum in Singapore, Sanghrajka noted that a lack of prime real estate supply in gateway markets is the key reason behind prolonged price increases.
“This is true of all regions, but especially so in the US. Core-pricing recovery has entered its sixth consecutive year with fundamentals improving on the back of stable growth and limited supply,” Sanghrajka said. He added that sovereign wealth funds and Asian capital is becoming increasingly dominant, especially in the current climate of elevated spreads and heightened political risk.
In Asia, liquidity is supported by cheap funding costs and attractive income returns. Sanghrajka noted that despite negative headlines, Asia’s long-term structural story remains with reform measures in place to support growth. He cited Japan as an example of a market that is liquid with most transactions at a loan-to-value ratio of 80%.
Sanghrajka is optimistic when it comes to Asian emerging economies. He said that rising wages, robust consumer spending and a rising middle-class segment are structural plays that contribute to Asia’s long-term growth potential, especially in China.
He said that the Eurozone and the UK remain attractive options, with Spain and Italy taking the spotlight for this year. In his presentation, he highlighted that the investment opportunity is moving south in Europe, with recovery spreading to lagging markets such Italy and Spain. He said that Milan and Madrid are faring exceptionally well; these cities boast of core office yields between 300 to 400 basis points above 10-year government yields.
He added that European markets are at the beginning of a rental cycle with retail parks in the Netherlands and Spain and prime shopping districts in Italy offering rental growth opportunities.