In a city humming with real estate development projects, one area showing great promise is now poised for explosive growth. Alphabet City, the eastern-most stretch of Manhattan’s East Village, is the new frontier for development that is pushing inexorably to the East River.

A streetscape of pre-war low rises that has long been neglected, Alphabet City is undergoing major gentrification. The area is sandwiched between 14th Street and Houston Avenue to the north and south, and points east from Avenues A, B, C and D to the massive Jacob Riis and Lillian Wald public housing projects on FDR Drive.

The principal asset of Alphabet City is that the area offers plenty of light and air. Most buildings, including the pre-war tenements that define the neighborhood, are low rise. Alphabet City is off the beaten path, with many charming tree-lined blocks, and anchored by two parks: Tompkins Square Park, a 16-acre oasis between Avenues A and B that has been considerably spruced up in recent years, and East River Park on East 12th Street, 55 acres on the river at FDR Drive.

Now that the real estate industry is taking notice of Alphabet City, many condominiums and cooperative projects, as well as new rentals, are in the planning stage or under development throughout the area.

Prices are rising, but still moderate as compared to space in other, well-developed neighborhoods. Generally speaking, rentals in new properties go for $40 to $43 per square-foot. Rents on Avenue A, one of the more sought-after sections, continue to climb but are still some 20 to 25 percent lower than what the market rate is for comparable space elsewhere in the city.

Residential sales properties are being marketed for an average price of about $400 to $450 per square-foot.

Alphabet City, a hub of the counterculture in the 1960s when artists and students from nearby New York University and Cooper Union first flocked there in search of low rents, is an ethnic mix. Roughly two different populations co-exist–settled families representing successive waves of immigrants alongside young singles and a fringe avant-garde.

A century ago what is now called the East Village took shape as the home of newly arrived immigrants, and with each wave of immigrants, it spread out eastward to become the nucleus of what is now Alphabet City.

At one time, the East Village was the German section of New York. Later it became home to Poles and other Eastern Europeans, including a lively and closely knit Ukrainian community who can be heard chatting in their native language Sunday morning after attending St. George’s Ukrainian Catholic Church on East 7th Street across from another neighborhood institution, McSorley’s Old Ale House. The Polish and Ukrainian restaurants that still thrive in the area testify to this East European heritage.

More recently, Alphabet City was settled by Puerto Ricans who arrived in such numbers there that Alphabet City is often called "Losaida," "Spanglish" for Lower East Side, and Avenue C has officially been given the name of Losaida Avenue.

Now Alphabet City is adding a new population of generally young professionals and executives to its working-class cultural mix, people who are starting to build careers and are attracted by the area’s slightly bohemian flavor, multiethnicity and affordability. Young mothers wave their husbands off to work in Wall Street and uptown each morning, and then take their children to the playground at Tompkins Square Park.

Tompkins Square Park, the site of labor rallies in the early years of the 20th century, is the main neighborhood gathering spot. Change is taking place all around it. Christadora House, towering over the park on the East Side, opened in 1887 as a settlement house. George Gershwin gave his first public concert in its third floor concert hall, according to the AIA Guide to New York. In 1987 it became a luxury coop.

Figuring heavily in Alphabet City’s newly charged appeal is the fact that in recent years a hip, young people’s "scene" has taken root on Avenues A and B, created by restaurateurs and other entrepreneurs escaping skyrocketing costs uptown.

Similar to what happened a few years back on Sussex and Ludlow Streets on the Lower East Side, Alphabet City has sprouted bars, restaurants and dance clubs that cater to the young, elbowing the bodegas, delicatessens, old fashioned taverns and corner stores that have long-served the neighborhood. Friday and Saturday nights have become very lively destinations for young revelers discovering the city’s newest "in" spots.

The old neighborhood diners are now being joined by increasingly upscale restaurants such as Il Bagatto on Second Street between Avenues A and B for Italian food, Aunt B’s at Avenue B and 12th Street for American home cooking and Café Margaux at Avenue B at 11th Street for French cuisine.

As day follows night, the new "scene" is stimulating residential development in a neighborhood of pre-war housing waiting to be rehabbed, sprinkled with new apartment buildings and filling further with the kinds of night spots and shops that target the young.

As the area grows, its future potential for real estate development is constrained only by the increasing difficulty of assembling sites for new construction. The overall vacancy rate in Alphabet City is low as long-time residents cling to their tenement apartments.

"Alphabet City is the next area to pop," says broker Louise Phillips, vice president of New York real estate brokerage firm Douglas Elliman. "Light and air are the major attractions in what I consider a cozy area of the city."

Phillips, of Douglas Elliman’s Westside office, is exclusive agent for the new condominium at 240 East 10th Street at First Avenue, just west of Alphabet City.

Scheduled for occupancy in the summer of 2001, 240 East 10th Street was the first condo project to approach the edge of Alphabet City, signaling further new development projects by Douglas Elliman in the neighborhood. The 37-unit, 17-story condominium sold out rapidly last June. Prices on the apartments ranged from $465,000 for a two-bedroom to $2.4 million for the penthouse, averaging $600 per square-foot.

What’s notable about the condo is that it is built on the air rights of Theatre of the New City, one of the many small theatre companies in the East Village that operate on tight budgets. The big bonus for the group is that it now owns its theatre. Down the block from 240 East 10th Street is the venerable 10th Street Baths, the last of the old Russian-Turkish schvitz emporiums, and not far away is the famous Second Avenue Delicatessen.

"Alphabet City reminds me now of the way Columbus Avenue was like 20 years ago," comments another Douglas Elliman vice president, broker Linda L. Rubin of the East Side office, 575 Madison Ave.

She is exclusive agent for 217 East 7th Street, one of the first generation of co-ops targeted for Alphabet City. The six-floor co-op, now under construction, will be ready for occupancy in the fall. Apartments will range from studios to two-bedrooms, featuring "smart" wiring, satellite dish TV, closed circuit TV security and roof and rear gardens. Prices have not yet been set.

"For a long period, the area was looked on as a transient neighborhood, a brief stopping place for young people," says Donald Capoccia of BFC Partners, the developer of 217 East 7th Street, commenting on the substantial activity in building deluxe condos, co-ops and rental buildings for newcomers who attend to stay. His company is busy with many projects throughout the East Village.

Another condo project currently underway is providing partially subsidized apartments for qualified middle-income families from the East Village, and will have a major presence in Alphabet City. Del Este Village, a 98-unit condominium project spread out over six sites between Avenues A and C, 10th and 13th Streets, will open soon, with all the apartments snapped up at prices ranging from $103,000 to $154,575.

Pre-war space, with the high ceilings cited so often in the classifieds, are beginning to approach the pricing in the more established areas of the city. Some examples: $650,000 for a 1,150-square foot pre-war walk-up loft on Avenue B, and $325,000 for a small pre-war studio, with separate kitchen and sleeping loft, on Tompkins Square overlooking the park.

Will Alphabet City change as it builds up with affluent new householders? Inevitably. Will it lose the old-world charm that is so attractive to many newcomers? To some extent, it probably will. But the betting is that the change will be for the better in cleaner streets, more attention from the city and a much bigger selection of where to shop and where to play.