Fed cuts interest rates to lowest level in 40 years.

The Federal Reserve cut its benchmark interest rate by half a point on Sept. 17, bringing it down to its lowest level in almost 40 years.

The government is also working on an economic recovery plan in the wake of the Sept.11 attacks.

Also cut was the federal target rate on overnight loans among banks to 2.5 percent from 3 percent, the lowest it has been since 1962. Banks cut their prime lending rate from 6 percent to 5.5 percent, which means lower interest rates on some home equity loans, among others.

The Federal Reserve action was aimed at stimulating economic activity via reducing borrowing costs. There is a widespread belief that more cuts will follow in the near future.

"We are seeing an enormous amount of institutional capital chasing real estate. Real estate, after all, is a long term investment," said Bill Shanahan, executive director of Cushman & Wakefield's financial services division.

Shanahan cited the REIT index as one of the few that have risen in the past few weeks, reinforcing the strength of real estate investments.

Prior to Sept. 11, many Wall Street firms had plans to lay off significant numbers of staff. One month after the attacks, many of these firms are doing just that, Morgan Stanley opening the floodgates two weeks ago.

Unemployment was on the rise before the attacks, according to economic data. It has risen even higher in recent days. More jobs were eliminated in September than in any month since the 1991 recession per Labor Department data.

"This does give some deals a kick start. It can only help," said Lynette Tulkoff of DG Hart Associates.

"I don't think that the fallout from the Sept. 11 attacks have yet to be felt however," she said.

Above and beyond the rate cut, another source worried about the massive numbers of Wall Street layoffs, and how that would affect demand for space.

"We are all cautiously optimistic. If there are more layoffs, as there appears to be, there will be less demand for space. So in that regard, I think the rate cut is a positive move," said Janice Stanton, managing director at Cushman & Wakefield.

The Federal Reserve combined its rate cut with a promise to "supply an atypically large volume of liquidity to the financial system."