The Port Authority Bus Terminal, for decades a symbol of urban decay and a hub of crime, drugs, and vagrancy, is moving toward a complete overhaul and could soon be topped with a soaring office tower or two.

With rents in Midtown Manhattan reaching record highs and vacancy rates dipping to new lows, developers are showing a renewed interest in building a 42-story office tower above the bus station and retail hub.

The board of the Port Authority today is expected to approve the resumption of negotiations with two prominent developers for the purchase of the lucrative air rights above the bus terminal on Eighth Avenue. The developers that were designated to build the commercial tower seven years ago, Vornado Realty Trust and Lawrence Rubin Co., moved away from the agreement after the real estate market faltered following the terrorist attacks of September 11, 2001. With the real estate market thriving, the developers are now back at the table and the project is expected to move ahead, Port Authority officials said.

The proposed office tower would add about 1.3 million square feet of office space above the terminal’s north wing and would finance the renovation of 55,000 square feet of retail space in the bus terminal, a spokesman for the authority said.

Officials from the bi-state agency, run jointly by New York and New Jersey, said they are also eyeing land on Tenth Avenue near Dyer Avenue and Gilman Plaza to build a new bus parking facility that could eventually act as the main bus terminal. That would leave the southern portion of the Eighth Avenue station up for sale for redevelopment, or the construction of another office tower.

It is expected that the sale of the air rights on the northern portion of the station would bring in hundreds of millions of dollars, which would be used for what Port Authority officials have called the “vital” renovation of the 57-year-old bus depot, which has been functioning above capacity for decades. The bus terminal handles about 200,000 passengers a day on about 7,000 buses.

“The bus terminal until recently was beyond the pale as a place to locate Class A office space,” the president of the Regional Plan Association, Robert Yaro, said. The seedy segment of 42nd Street between Sixth and Eighth avenues for years was known as “The Deuce,” for its assortment of shady businesses, peep shows, drug dealers, and prostitutes.

The air above the bus terminal has transformed into valuable real estate, as Eighth Avenue has undergone a real estate renaissance. The New York Times Co. this summer is slowly moving its offices to a newly constructed building across the street from the bus terminal, and SJP Properties is expected to break ground this summer on a 1.1 million-square-foot office tower on a long-vacant lot at 11 Times Square.

The bus terminal “is the logical next space for new office space in Midtown,” Mr. Yaro said. “It’s one of only a handful of large build-able sites that are left, and it makes sense that they had to wait until the other sites filled up.”

Building a high-rise tower above a transportation hub, such as the MetLife Building that rises from Grand Central Terminal, provides a boost to mass transit use, Mr. Yaro said. “It provides an incredible convenient commute, and ensures that there will be a higher proportion of transit use there than at any other site in the city,” he said.

Vornado, a publicly traded real estate investment trust, is one of the city’s most active developers. Just to the south of the bus depot along Eighth Avenue, Vornado is seeking to build tens of millions of square feet of office and residential space near Pennsylvania Station in conjunction with the Related Cos.

“The bus terminal was for a long time a metaphor for how unwelcoming and dangerous New York City was,” the president of the Times Square Alliance, Timothy Tompkins, said. “This building going forward is a metaphor for how much New York City has changed.”

“Teams of people who are not tourists on this street now are commuters who in the past would not walk on 42nd Street,” the president of the nonprofit group New 42nd Street, Cora Cahan, said. “To have a building above the Port Authority will add to the cacophony and energy of the neighborhood.”

Neighborhood leaders are now advocating for the development of an architecturally distinct building that would transform 42nd Street and Eighth Avenue into a landmark corner of Manhattan.

“You have the Times building, and a signature architecture at the Westin Hotel and the Hearst tower up north,” Mr. Tompkins said. “Our hope is that whoever is chosen to develop this tower will place an emphasis on building something architecturally distinct.”

Some skeptics point to a loss in the neighborhood’s resurgence. “The new tower will signify how Times Square has lost its mixed-class atmosphere,” a professor of architecture and history at the University of Massachusetts, Amherst, Max Page, said. “No one should long for seediness and drug-dealing and crime, but there was a wider range of amusements and appeal to a wider range of people. Now it’s an-upper middle-class place.”