A Washington County developer's bid to help transform the Fifth and Forbes corridor Downtown has kicked into high gear.

At the former Lazarus building at Fifth Avenue and Wood Street, steel and framing are poking above the rooftop, part of the bid by Millcraft Industries to transform the failed department store into a mix of residential, retail and office space.

The three floors being built on the roof of the four-story structure, now known as Piatt Place, will accommodate 58 condominiums, 33 of which have been sold. The first residents are expected to move in by February.

Less than a block away, the old G.C. Murphy five-and-dime store is being gutted to make way for apartments, fitness space and shops, Millcraft's other major Downtown project.

Many of the windows have been removed from the upper floors of Murphy's and adjacent buildings, sending musty odors across Forbes Avenue. A construction 2 entrance on Fifth Avenue offers glimpses of the old store's first floor, once cramped with clothing, candy, school supplies and countless other odds and ends but now dark and dusty.

Although the $40 million project is about a year away from completion, Millcraft already has a waiting list of some 200 people for the 46 loft-style apartments, said Lucas Piatt, vice president of real estate.

The units, some of which will be renting for as low as $700 a month, are designed to reach more of a middle market than the high-end rental and condo developments Downtown, including Piatt Place. Millcraft plans to begin renting them early next year.

"The interest is huge," Mr. Piatt said.

Interest in the luxury condos at Piatt Place, where prices range from $300,000 to $1.5 million, have not been as strong, but Mr. Piatt said others are pleased with the pace of sales so far.

With 33 units sold, condo sales have passed the halfway mark. As a promotion, Millcraft offered the choice of a free Smart Car or the equivalent dollar amount in condo upgrades to the first three people who purchased units last month.

"We're very confident about the progress we're making here," Mr. Piatt said, adding that sales are slightly ahead of Millcraft's internal projections at this point.

"When we're done with the construction, we expect the majority to be sold. We're getting good prices, which is tough to do in a market like this."

Mr. Piatt and Lorrie Andria, who is overseeing the condo sales, believe that the high price of gasoline will drive more people to take a closer look at living Downtown and could be a boost to the development.

Ms. Andria said the 10-year property tax abatement now available to Piatt Place condo buyers also has helped to stir up interest. She said 20 units have been sold since the abatement program was approved last year.

"We've really seen a big difference with the tax abatement. It's been a huge attraction for us," she said.

Tom Sullivan, a commercial broker for Pennsylvania Commercial Real Estate, said that getting sales agreements on 33 units is a "pretty decent accomplishment" given the credit environment and economy.

"If, in fact, they have 33, that's pretty good," he said. "It's hard to make light of that, especially given that you're going to have to spend a minimum of $300,000 to go into the building."

Piatt Place still is facing challenges. So far, Millcraft has failed to find a tenant for three floors of office space available.

Equitable Resources looked at the building for a possible expansion, but no longer is in the mix. Mr. Piatt said Millcraft is talking to the state about leasing space once the State Office Building Downtown is sold, but still has no deal.

On the retail side, Millcraft has enticed Capital Grille and McCormick & Schmick's to open restaurants at street level. It still has one space available on Fifth Avenue and is hoping to fill it with a fashion retailer.

Mr. Piatt also said he has talked to the owners of two Fifth Avenue buildings, including the former Lerner's store, about a possible partnership on another residential project called Wood Street Lofts.

No deal has been reached. Millcraft isn't interested in purchasing either at this point, Mr. Piatt said, adding that he feels the owners are asking too much for the properties.

Mr. Sullivan believes Millcraft should stick to the Piatt Place and Murphy's projects rather than try to take on another redevelopment.

"I think they've got their hands full trying to make these things happen," he said. "The pace of trying to get office or retail tenants into town can be fairly lengthy."

Millcraft is planning a formal ground breaking for the Murphy's project, dubbed Market Square Place, in September or October. It hopes to complete the construction next summer. However, the Downtown YMCA, which is moving its facilities to the redevelopment from the Boulevard of the Allies, could be moving in as early as March.

Mr. Piatt said there has been "very, very good interest" in the street-level retail space available as part of the conversion, but added that Millcraft will take its time in evaluating potential tenants.

"We're being pretty picky about who we bring in. We want the right use. We don't want to fill it up. We want it to be something unique," he said.

The Murphy's redevelopment includes $6 million in financing involving historic tax credits, $5.6 million from the state and $21 million in other forms, among them new market tax credits. Millcraft is putting in $2 million.

The Lazarus conversion is expected to run $65 million, much of it privately financed. The state is kicking in $3.75 million in grants and loans.