Ultra-luxury five-star hotels, the largest supermarket in the Northeast, apartments renting for $80 a square foot, condominiums selling for $1,500 a square foot, top-flight restaurants, a hip nightlife scene, and high-end boutiques: It’s not TriBeCa, the meatpacking district, or the High Line area I’m talking about — it’s the Bowery and the Lower East Side.

After several years of stratospheric growth and a number of new developments dotting the skyline, the area once known for Gus’s Pickles, discount clothing, and a fair amount of vagrancy now commands real estate prices for new developments higher than found in parts of the Upper East Side, and comparable to Chelsea and the financial district.

Perhaps nowhere is the transition more obvious than at the corner of East Houston Street and Bowery. In June 2005, the first tenants moved into Avalon Chrystie Place, a mixed-use apartment building with 361 rental units built on a former parking lot. It was the first of four rental towers under development by Avalon-Bay Communities, one of the nation’s largest apartment real estate investment trusts.

Tenants who signed leases at Avalon Chrystie received no concession and were paying annual rents of $56 a square foot. At the opening, monthly rents were $2,300 for a 494-square-foot studio, $3,400 for a 700-square-foot one-bedroom, and $4,395 to $5,600 for a 1,190-square-foot two-bedroom, two-bath unit.

Fast-forward two years and those rents have increased by more than 40% for apartments in the developer’s second rental building. Rents are approaching close to $80 a square foot for a 420-square-foot studio across the street at the Avalon Bowery Place, which recently opened at 11 E. 1st St. Apartments available for rent are being offered from $2,795 for a 420-square-foot studio, and a 1,335-square-foot two bedroom with two baths on the 10th floor is renting for $8,595 a month.

Later this summer the rental office will open at the Ludlow, the 23-story residential tower with 242 units, of which 20% will qualify as “affordable” housing. In addition, households whose gross income is not more than 150% of the area’s median income (about $70,000 for a family of four) will occupy 5% of the units. The balances of the units are expected to fetch rents in excess of $70 a square foot. The Ludlow is located on the site of a former parking garage across from the famous Katz’s Delicatessen at 188 Ludlow St., at the corner of Ludlow and East Houston streets.

“The profile of the typical renter in the area is changing from the ‘counter culture hipster’ to the ‘more mainstream’ hipster and young professional,” the director of sales at Massey Knakal, Michael Desjadon, said. “The primary impact that this is having on the neighborhood is an almost staggering upward trend in free market rental prices and, suddenly, a demand curve that is far outpacing supply.”

“We are seeing the trend of people moving east due to the escalating prices in neighboring areas like Greenwich Village, SoHo, and TriBeCa and the availability of new developments in the Lower East Side,” the chief operating officer of Citi Habitats, Gary Malin, said. “This can also be attributed to the perception of a somewhat better value and the greatly improved safety in our city. In fact, one of our recent condominium projects, One Ave B sold out within four months and set record prices for that neighborhood, at prices north of $1,200 per square foot.”

Signs of neighborhood change are hard to miss. The new 60,000-square-foot Museum of Contemporary Art at 235 Bowery is under construction. In March, the 70,000-square-foot Whole Foods Market — its fourth store in Manhattan and the largest in the Northeast — opened its doors at the corner of Bowery and Houston. Residents have already moved into Blue, the 16-story residential condominium at 105 Norfork St. The building is on the site of a former parking lot belonging to a famous kosher restaurant, Ratner’s.

“Today, the island of Manhattan, which has a finite amount of land, has no “bad” neighborhoods, and areas such as the Bowery and the Lower East Side, once considered ‘combat zones,’ are now rapidly gentrifying,” the senior managing director of the Hospitality & Gaming Group, Daniel Lesser, said. “In addition to experiencing a surge of residential and retail/entertainment development, these areas are also benefiting from a myriad of commercial development including lodging facilities.”

Mr. Lesser said Paul Stallings was one of the lodging pioneers of the Bowery and the Lower East Side. He developed the 21-story Hotel on Rivington, located on Rivington Street between Essex and Ludlow streets, earlier in the decade. Now hotels are turning up everywhere.

Just a couple of blocks from the Hotel on Rivington, the Pomeranc family is developing the Thomson LES, a 142-room hotel with more than 50% of the rooms as suites, on Allen Street. Across from Bowery Hotel, Peck Moss is building the tallest building in the East Village, the 23-story Cooper Square Hotel, located where Third and Fourth avenues merge between Fifth and Sixth streets. Early next year, developer Peter Moore is expected to complete an eight-story, 63-room hotel and condominium at 250 Bowery, between Houston and Prince streets.

A principal at Thompson Hotels, Michael Pomeranc, said the Lower East Side “is a multi-faceted neighborhood for music, art, bars, and restaurants. It is tomorrow’s Greenwich Village, with better demographics, and the new mecca for bohemia.”

“Who would have thought of an ultraluxury five-star hotel with services on the Bowery,” the president of BD Hotels, Richard Born, said. “We are in the middle of our soft opening of the Bowery Hotel located at 339 Bowery. We began renting rooms in March and for the first two months he has sold 90% of our available inventory. We have experience overwhelming positive feedback from those who have stayed with us, many stating that the hotel is a relative bargain for what we are offering in the $400 to $500 a night rate range.”

The chairman of the national real estate practice at Greenberg Traurig, Robert Ivanhoe, said: “Even the most unlikely spots in Manhattan for development have now become acceptable or even hot, so why not the Lower East Side?”

“Once a few new projects that were initially viewed as trailblazing succeed and take hold, it makes it easier for other projects to prosper and the gap between the lower end and the high end of the market and condo prices diminishes. That’s precisely what is happening to the Lower East Side,” Mr. Ivanhoe continued. “Once the area is viewed as acceptable for people to live in safely and some entertainment, shopping, and services fill in, the foundation is in place for a strong, stable area for years to come.”

“Its not just condo mania, it’s a confluence of everything coming together in the Lower East Side,” a principal of Columbia Street Developers, Marshall Sohne, said. “From working in the neighborhood, I got to see some of the forces at work. The Bowery was the commercial kitchen district. Now just look at Bond Street between Lafayette and the Bowery where people want a location that they are paying real numbers for lofts without any services. These are ‘hip’ artistic types with big dollars, willing to pay the type of prices that were paid by the tycoons living in the Time Warner Center, but these people prefer to be on Bond Street.”

In 2002, Metropolitan Development and the Carlyle Group completed the 12-story rental apartment building NoLita Place at 199 Bowery. Now the building is in the process of being converted to condominiums. One of the developers of NoLita Place, Jane Gladstein, said, “When we developed the building, the only people that knew about Nolita were young trendy individualists who thrived in what were then perhaps the coolest neighborhoods in downtown Manhattan. The streets did not come alive until midnight and your neighbors were largely the occupants of the many SROs that line the Bowery. The casual and laid-back edginess that once defined the area is fading.”

There are skeptics that doubt the area will be completely transformed in the current housing boom. Some analysts say that if and when the market cools, the Lower East Side could lose some steam. A principal at Beck Street Capital, Kevin Comer, said, “In a softening, or for the more optimistic, stabilizing market, differentiating between short-term popularity and long-term stability becomes more and more important.”

He said the Lower East Side would need more time to “fully transition the manufacturing uses, homeless shelters, and subsidized housing into other areas. In all likelihood, there won’t be enough time in this particular cycle for that to happen.”

The area’s rapid development has created a backlash from existing residents, who say the new building is out of scale. The community boards and department of city planning are responding and looking at a contextual rezoning. The director of sales at Massey Knakal Realty Services, Michael DeCheser, said, “The Lower East Side is in the throes of downzoning, thanks to a few recent developments that pushed the envelope and reached high in the sky. What this means is that there is no talk of more tall buildings. A number of sites are frozen at the moment because of the zoning question. In some cases, there is a big contextual and size difference between what a developer can build in the existing zone and what is allowed should the zoning proposal go through.”

I have to concur with John Cicero, of Miller Cicero, when he says the Lower East Side has such a distinctive history that it may lose its identity. “It is quickly erasing many of the qualities that defined its marvelous blend of those old Orchard Street pushcarts and most amazing restaurants, clothing stores, and food markets,” Ms. Gladstein said. It is becoming the next bastion of gentrification, and the avant-garde of young urban professionals.

Mr. Stoler, a contributing editor to The New York Sun, is a television broadcaster and senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.