Company: SQFTP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001437749-25-010185
Chunk: 899

Company: Presidio Property Trust, Inc.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 3
Chunk 899
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 known as an economic soft landing. Nevertheless, there are both lingering and emerging risks, including soft property fundamentals in some sectors, higher interest rates reflecting fiscal imbalances, and the possibility that shifting tariff policies could restrain commercial real estate (CRE) performance in 2025."  Current U.S. economic conditions that seem to support a soft landing according to Nareit are:

      ● 
      Real gross domestic product (GDP) increased at an annual rate of 2.8% in the third quarter of 2024, according to the “second” estimate. 

      ● 
      Total nonfarm employment increased by 227,000 jobs and the unemployment rate was 4.2% in November 2024. 

      ● 
      The Consumer Price Index for All Urban Consumers (CPI) increased 2.7% over the 12 months through November 2024 and core CPI (excluding food and energy) rose 3.3%. 

      ● 
      Through November, the Federal Open Market Committee (FOMC) reduced its target policy rate range twice in 2024; it now stands at 4.50% to 4.75%. 

      ● 
      As of November 2024, the Bloomberg consensus forecast survey placed the probability of a U.S. recession within the next 12 months at 25%; it was 30% in September. 

According to Nareit, the lingering public-private real estate valuation phenomenon has impeded significant property transaction activity. Despite reaching its crest two years ago, the spread between REIT implied and private appraisal cap rates has been stubbornly slow to close. Recent REIT performance, however, has made material progress in closing the gap. The long goodbye to the current valuation divergence may finally be reaching its end. Quarterly total return differences and cap rate spreads have a negative relationship, for example:

      ● 
      When REITs had the greatest degree of outperformance (+22.8%) in the fourth quarter of 2023, the cap rate spread plunged by 94 bps. 

      ● 
      When REITs experienced the greatest degree of underperformance (-19.5%) in the second quarter of 2022, the cap rate spread surged by 79 bps. 

      ● 
      When REITs outperformed (+16.5%) in the third quarter of 2024, the cap rate spread dropped to 69 bps, a level less than half its previous quarter’s value