Company: SQFTP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001437749-25-010185
Chunk: 1133

Company: Presidio Property Trust, Inc.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 4
Chunk 1133
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 the face of record amounts of new supply following record rent growth in the past few years. Office occupancy reflects a shifting and uncertain demand environment with the advent of more widespread remote work. As of the third quarter of 2024, CoStar occupancy rates for the retail, industrial, apartment, and office sectors were 95.9%, 93.4%, 92.1%, and 86.1%, respectively.

Occupancy rate trends will likely weigh on future property operational performance. They also underscore the need for realism in investment underwriting (1).

(1) Source: https://www.reit.com/news/blog/market-commentary/reit-cre-outlook-evolution-2025

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CREDIT MARKET ENVIRONMENT

Current market rates in February 2025 on fixed rate mortgages on homes ranged from 6.15% - 6.98%, depending on the term(2). Current market rates for 5–10 year fixed rate loans for commercial properties ranged from 5.55% - 6.88%, depending on the type of building (retail/industrial/office)(3). Interest rates decreased in 2024 compared to 2023 due to the Federal Reserve cutting interest rates 100 basis points, or 1%, in hopes of slowing down inflation going from 5.5% in July 2023 to 4.5% in December 2024.  According to the Federal Reserve "The Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective”(4).  Although rates decreased in 2024, it does not necessarily indicate that we would be unable to refinance or obtain mortgages on new homes or commercial properties at the same rate we have historically when they come due, as rates vary by property and are dependent upon factors including property cash flows, occupancy rates and lender credit.

As noted by Colliers Securities in its Q32024 Office Outlook: "The U.S. office market ended 2024 with early signs of stability as