Dwindling Manhattan space gives Long Island City appeal.

As the supply of office space dwindles in Manhattan, many tenants are looking across the East River to Long Island City to find new space.

As a result the neighborhood has been shedding its industrial past, with former factories and warehouses being turned into high-tech office space. Other multi-story buildings are being sold to developers who are converting them for residential use.

"More tenants are looking to buy rather than lease," said Richard Maltz, President of Greiner Maltz of New York Inc.

Maltz said the buildings that are being sold have become obsolete as office space but are good candidates for residential conversion. The small floor plates are inadequate to serve most office clients but are good for residential use, he said.

"The prices are as high as they've ever been. I hope the market stays this way," Maltz said.

David Brause, vice president of Brause Realty, is equally optimistic about Long Island City. In fact, the strength of the market was a major factor in the company's decision to spend $20 to $30 million to renovate the Brewster Building on speculation, or without securing tenants prior to the work. Brause Realty is starting to market space in the renovated building at 27-01 Bridge Plaza North, which is now called BridgePlaza TechCenter, he said.

It seems fitting that the building, built in 1911, was once used to manufacture horse-drawn carriages and, as time passed and technology advanced was used to build Rolls-Royce automobiles and World War II fighter planes. When renovations are complete, tenants will have access to the amenities necessary for survival in the high-tech field, such as fiber optic service, 21st Century mechanical, electric, and electronic systems, and around-the-clock security services, Brause said.

"The building is so flexible that it has withstood all these uses over the years," he said.

The six-story building designed by architects Gensler & Associates will feature new windows, elevators and an upgraded power and emergency generator system. Engineers on the project are Jaros, Baum & Bolles and the construction manager is Tishman Technologies. With floor plates of 49,000 square feet in the basement, 50,000 square feet on the ground floor and 61,000 square feet on floors two through six, Brause is anticipating strong interest in the space.

Rents for the telecommunications center will be $22.50 per square foot and, for the office building, will be $24 per square foot for the basement space and range from $25 to $26.50 for the rest of the building, according to Brause Realty.

"We're bullish about Long Island City in general but this is a good time in the market for this project," Brause said.

Another major project in the neighborhood is being done by developer Irwin Cohen, who is renovating a one-million-square-foot building at 47th Avenue and 31st Street known as The Factory with the intent of attracting high-tech tenants. Cohen is a principal of A.T.C. Management which runs the factory for him and partners AG Real Estate Fund, Belvedere Capital and Scoggin Capital, the same team that did Chelsea Market.

"One result of the increased interest in areas like Long Island City is bifurcation of the commercial real estate market in the outer boroughs. In the past, the outer boroughs were viewed as a single tertiary market, but now some areas are being viewed as more desirable than others," said Marjorie Seaman, president of Seaman Realty & Management Co. Inc.

"The boroughs are being seen as a value-added product not just a consolation prize," Seaman said.

Seaman also contends that strong interest in Long Island City is causing owners of some industrial buildings to "mothball" their buildings by refusing new leases to industrial tenants in the hope of converting the building to office space. She estimates that there is a few hundred thousand square feet of space in Long Island City, or about 15 percent of the market, that is vacant despite industrial tenants who are interested in renting it.

Seaman contends that the prospects for converting these buildings to office space, however, may be dim. Office tenants looking to leave Manhattan for the outer boroughs are more likely to move into the type of space that will be constructed as part of the Queens West development. Plans call for building two million square feet of Class A office space, she said.

"Office tenants aren't looking for 'B-type,' space they're looking for cheaper 'A' space," she said.

Gayle Baron, Executive Director of the Long Island City Business Development Corporation, said she fields several calls each day from businesses seeking to relocate to Long Island City. She said most of the inquiries come from Manhattan businesses looking to relocate to the outer boroughs.

"You can, sense the energy, the prosperity here," Baron said.

While the community wants to welcome high-tech companies into the neighborhood, they also want to maintain the industrial presence that has long been a part of Long Island City's vitality. The industrial businesses provide much-needed jobs for the Queens immigrant population, she said.

"It's always a balance, we're trying to keep that balance," she said.