The Cathedral of Commerce once again is living up to its nickname.

The Woolworth Building, a 1913 Gothic masterpiece in downtown Manhattan, was set for conversion to luxury condominiums, but the price of commercial office space has risen so much that the owners changed course.

Instead of becoming one of the coolest places to live in New York City, the building will house luxury office space. In a city where people pay $500,000 for a studio apartment, the owners -- led by the developers Steven Witkoff and Ruben Schron -- scrapped a 7-year-old residential plan in May in favor of the commercial project.

While the residential real estate market is flat, New York's commercial property market has been galloping ahead at least since 2003 or 2004.

Except for a blip following the September 11 attacks of 2001, commercial real estate has been climbing since the recession of 1992, with the curve turning steepest in the past year.

It's been an amazing run. It's just gotten insane. There's not enough product out there for all the money that's chasing it, said Peter Hauspurg, chief executive of Eastern Consolidated, a property services firm. It's almost like values have lost their mooring.

Experts see few signs of a slowdown, if any.

It's not driven by one sector. It's not only law firms, it's not only financial firms. It's across the board, said Steve Eynon, leasing director at the Empire State Building.

Like just about everywhere else in Manhattan, vacancies are down and rents are up at the Empire State Building. Rents rose 18 percent in the past year and 11 percent in the second quarter alone, Eynon said.

In the pricier Midtown district, eight blocks further north, monthly rents for Class A space are up 34 percent in the past year and up 74 percent from a September 2003 low point, according to brokerage Colliers ABR.

In all of Manhattan, office buildings valued above $5 million are selling for $730 per square foot in 2007, up 18 percent from last year and up 143 percent from 2004, according to Real Capital Analytics. Meanwhile apartment prices fell 2.4 percent in 2006 and are down 18 percent this year.

In one example of the frenzy, property firm Tishman-Speyer sold the New York Times building to Israeli conglomerate Africa Israel Investments Ltd. for $525 million in April, three times the $175 million it paid when it bought the building from the New York Times Co. in 2004.

THE NEW DOWNTOWN

In the Financial District, which includes Wall Street and the Woolworth Building, rents are up 25 percent in the past year and up 62 percent from a low point in November 2004.

Some 10 million more square feet of office space will open there as four towers are built on the World Trade Center site over the next five years. In addition, Goldman Sachs and JP Morgan Chase are building headquarters totaling another 3.4 million square feet of space.

A few blocks away is the Woolworth Building, which at 792 feet was the tallest building in the world when completed in 1913 with Gothic spires, a terra cotta exterior and elaborate lobby. Built with the fortune raised by the Woolworth retail chain, the building was called the Cathedral of Commerce.

He (owner Witkoff) sees the improvements that are going on next door. Even if he's going to sell these as condos, it might make sense to lease them out as office space for 10 years first, said Dan Fasulo, managing director at Real Capital Analytics.

The Woolworth Building's 60 floors are split between a 30-floor box that is its base, which was never planned for residential use, and a 30-floor tower on top that has been gutted for renovation.

The upper floors have roughly 10,000 square feet of floor space, high ceilings and 360-degree views.

It's for fewer people making large sums of money in a much smaller place. Something like a hedge fund that doesn't need that large of a staff, said Roy Suskin, a building spokesman.

Through Suskin, the owners declined to comment on the market factors behind the switch back to a commercial project.

It was a surprise. No one would have ever thought they would go office down at Woolworth when the deal was originally done, Hauspurg said. But rents down there make projects like that look feasible. There's no sign of a downturn in Manhattan.

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