Economy expected to respond to actions of Federal Reserve.

The U.S. economy is expected to respond well to Federal Reserve actions and recent tax refunds, which should positively influence the real estate market for the remainder of 2001, according to a mid-year report released by Cushman & Wakefield's Analytics group, the research and analytic unit of the global real estate services firm. Although vacancy rates have climbed above last year's levels across the United States, they are still below the historical level of "markets in equilibrium," the report states.

"The year 2000 was an anomaly," said Maria Sicola, senior managing director of Analytics at Cushman & Wakefield. "In many markets, most notably the downtowns, vacancy rates were at 5 percent and less. So the rising vacancy rates through mid-year 2001 do not present an imbalance in most markets."

At the close of the second quarter, the national downtown vacancy rate was 9.4 percent, and the suburban vacancy rate was 13.6 percent. Cushman & Wakefield expects the downtown rate to stabilize between 10 percent and 12 percent through 2003, and the suburban rate to moderate between 14 percent and 16 percent through the same period.

The rise in available sublease space has been a "driving force behind the increase" in vacancy rates in 2001, according to Ms. Sicola. The amount of available sublease space has risen dramatically in the past six months, soaring from 41.6 million square feet at year-end 2000, to 75.3 million square feet at mid-year 2001, according to the report. Internet and related technology firms are returning unneeded expansion space back to the market in volume.