The city is working on a plan to transform Sherman Creek, a strip of waterfront land near the northern tip of Manhattan that urban planners and community leaders say has been underutilized for years and is ripe for development.

Parking lots, Con Edison facilities, and chain-link fences barring access to the Harlem River now dominate Sherman Creek, but the city and community leaders want to re-develop the area with a combination of housing, retail, office space, and a waterfront esplanade.

The neighborhood was used as one of five case studies in a June 2005 report commissioned by the Manhattan Institute’s Center for Rethinking Development. The report concluded that outdated zoning classifications are hindering areas throughout the city that would otherwise be prime candidates for development.

Although much of the Sherman Creek area is zoned for manufacturing and industrial uses, few manufacturing jobs remain, a trend that mirrors a citywide decline in recent decades.

“There is a clear consensus that, in this case, we believe the zoning is outdated,” the executive director of the Department of City Planning, Richard Barth, said yesterday at a Manhattan Institute forum at the Harvard Club on West 44th Street.

The Sherman Creek effort is one of several projects in which the city, in tandem with private developers, has sought to stimulate economic growth by rezoning manufacturing and industrial areas to accommodate residential and commercial development.

A host of city agencies have been hatching a development plan for Sherman Creek, which Mr. Barth said could be ready in the next couple of months. The city is focusing on a section of land with borders at 207th Street to the north and Sherman Creek to the south. West to east, the plot stretches from Broadway to the Harlem River.

Despite the consensus calling for a zoning change, the development of Sherman Creek faces a large obstacle in Con Edison, which owns several facilities in the area and says it needs to build more.

A spokesman for Con Edison, Chris Olert, said the company was looking forward to working with the city. “But we own the property, and we need to ensure reliability,” Mr. Olert said. “We know that we need to build facilities.”

A possible confrontation with Con Edison over Sherman Creek would add a new twist to the Bloomberg administration’s development push, as it would pit the city against a company that must accommodate the increased energy demands created by development across the five boroughs. A report released last month by the New York Building Congress warned that the city could face an electricity shortage because of major real estate development projects planned over the next 20 years. The study called for an investment in infrastructure improvements to cope with the higher projected demand.

“The city is booming, and we need to meet that growth,” Mr. Olert said.

Community leaders in Sherman Creek and nearby Inwood and Washington Heights are working with the city and are supportive of zoning changes, but they are waiting to see the city’s proposal. A key issue will be housing, especially the number of proposed units that low- and moderate-income earners can afford.

“Housing is the keystone on this,” the chairman of Community Board 12, Martin Collins, said. He expressed concern over proposals from developers that the housing be split between 50% market rate units, with the rest being low- to middle-income units. That idea, Mr. Collins said, is unacceptable because the average annual income for residents in the area is only about $21,000.