THERE is old Mayfair: very grand, but anonymous, a place of prestigious corporate headquarters and deluxe hotels, with a tiny population of very rich people. And there is new Mayfair, still grand, but fast shedding its stuffiness, as 18th-century mansions used as offices continue to be converted back into houses and apartments. The old Mayfair is Shepherd’s Market, an enclave of narrow streets, full of history but slightly sleazy; the new Mayfair is Dover Street Market, a collection of boutiques under one roof described by Vogue as the coolest shop in London.

The American designer Marc Jacobs’ new store on Mount Street is another visible example of London W1’s new halfway-to-hip status. Jacobs’s reputation lies not only in his ability to set trends but also to turn them into a business success. Mount Street is usually described “as a handsome street in the heart of Mayfair”, but it has never been associated with chic. The kind of people who shop at Marc Jacobs should start to change all that.

Next week Mayfair will even have its very own branch of Primark, at Marble Arch, just around the corner from Grosvenor Square. This development has been the cause of some excitement, confirming that the rich are as interested in a bargain as everyone else. Indeed, for many of those now settling in this location the chance to get something on the cheap (a relative concept, remember) is exactly why they chose Mayfair in the first place.

Peter Wetherell, a Mayfair agent, sums up the neighbourhood’s relative affordability: “We are currently selling a 12,600 sq ft property on Upper Brook Street for £15 million; a roughly comparable house in Belgrave Square is on sale for £35 million.” These two locations are less than a mile apart. The person who buys Upper Brook Street will have the fun of transforming it from an office suite into a palatial home; the six floors include a ballroom added in 1823 when the property was owned by Edward Hughes Ball-Hughes, known as “Golden Ball”. He bought the house as a pied-à-terre for £4,000 in 1819 and sold it for £12,000 in 1825, the equivalent of £30.4 million today.

Mr Wetherell has been involved in returning 250 Mayfair addresses to residential use; another 65 are set to undergo the same process. The grand families that owned these houses left them after the Second World War, unable to meet the bills for their upkeep. The properties will now pass into the hands of the new elite class, made up of the hugely wealthy from overseas and the ranks of hedge-fund managers and investment bankers.

Mayfair’s transformation has been overseen by the Grosvenor Estate, landlord for 300 years to 100 acres of this part of Central London. Nicholas Gray, Grosvenor’s development manager, explains that the group is trying to create urban villages. He says: “With a wider mix of tenants, the local community benefits from a better range of services and shops. This is often led by people in the fashion industry, many of whom desire places that are off the established pitch and who are attracted by the architecture of Mayfair.”

Knight Frank figures show an overall average 40 per cent price rise in Belgravia over 12 months, against 25 per cent in Mayfair. Liam Bailey, Knight Frank’s head of residential research, attributes Mayfair’s slower growth to the perception “that it is still a commercial, not a residential, neighbourhood, whereas in fact it’s a more mixed-up area. Only half is offices, the rest is housing and bits of it social housing”.

The newcomers, who have realised that Mayfair is more than an exclusive industrial estate, reap the benefits of its central location. Mr Bailey notes: “A City type who perhaps has a larger house in the country can buy a crash pad here for £500,000; the Jubilee Line from Green Park gets him to Canary Wharf in 15 minutes.”

This new-style resident can go running in St James’s Park or Green Park and eat out in the area’s impeccable restaurants, which include the Cipriani, the Connaught, the newly refurbished Scott’s and the Wolseley. The George, a private members’ club, exemplifies the new Mayfair; elegant, discreet but not staid. One morning last week, there were two FTSE 100 chief executives having breakfast in the dining room. Pangaea and Mahiki cater for the younger nighttime clubbing crowd. These establishments represent a return to Mayfair’s fun-loving past; first typified by Vanity Fair’s Becky Sharp, the very archetype of the party girl who lived in a “very small comfortable house” in Curzon Street. www.wetherell.co.uk, 020-7493 6935

FORSALE

This three-bedroom flat, above, on Green Street, Mayfair, has an understated feel. It has a total of 2,357 sq ft, terrace and garden, and is for sale for £2.65m (Knight Frank, 020-7499 1012). The three-bedroom property, below, on Upper Brook Street, is decorated in the lavish old Mayfair style. It has 3,358 sq ft and an attractive small garden. It is for sale for £4.95m (Savills, 020-7824 9049).

FACTFILE

Mayfair is the rectangle of streets and squares bounded by Oxford Street, Regent Street, Piccadilly and Park Lane. Formerly the most expensive slot on the Monopoly board, it was dropped from an updated version of the game. Prices per square foot are £2,000 to £2,500, Strutt & Parker says. The property database Hometrack puts the average property price in Mayfair at £632,000. Security installations around the US Embassy in Grosvenor Square have been the source of discontent among residents. There are fresh rumours that the embassy wants to buy the site.

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers