Elevator music is about to receive a little lift. The Hit Factory, once New York’s funkiest recording studio, is being turned into an upmarket apartment complex, including duplex penthouses at more than $4m (£2m) a pop.

There is not much left of New York’s shabby-chic rock‘n’roll landmarks: the Chelsea Hotel has gone a bit posh, while CBGB, the punk mecca, closed its doors for the last time in October.

But nostalgic baby-boomers and city slickers seeking a blue-chip investment for their year-end bonuses are all queuing up for a peek inside the renovated seven-storey building that once housed the renowned studio. The level of interest in its 27 one-, two-, and three-bedroom loft-style flats indicates that, despite a nationwide property slumber, the “city that never sleeps” is still awake.

Situated near the junction of West 54th Street and Ninth Avenue, in a once rough quarter of Manhattan known as Hell’s Kitchen, the building was bought in 1968 by songwriter Jerry Ragavoy with royalties earned from penning hits for the Drifters, the Rolling Stones and Janis Joplin, who then invited the artists to play at his “house parties”.

Six years later, Ragavoy sold it to Edward Germano, a budding pop tycoon who, needing to get his investment back, turned it into a massive warren of recording studios, bunkers and smoke-filled rooms where rock stars could get a little “privacy”.

The first star to record an album there was Stevie Wonder, working on Songs in The Key of Life. The blind musician, who liked to wander around between takes of Isn’t She Lovely and Sir Duke, complained: “Eddie, I love the studio, I love the place, but you got to stop moving the doors.”

Germano knew how to please: he would rip up carpets if they offended a sensitive eye, or fill a studio with hay to make a country musician feel more at home — Nashville stars were not known for their sense of irony.

At its peak, the Hit Factory was cacophonous with musicians creating monumental works. “Madonna would be in one room, and in the next room would be the Rolling Stones, and in the next would be Billy Joel,” says Germano’s son, Troy. “And they all talked and worked together, and the music just got richer and more colourful.”

John Lennon, too, spent many months there working on his “comeback” album, Double Fantasy, with Yoko Ono. During the recording, Germano gave Lennon and Ono a private room on the top floor, which he sealed off for the shy couple. “I had his room done like an elegant English living room with chaise longues and paintings that I liked,” Ono said later. “John loved it and hung out there all the time.” When Lennon was shot in December 1980, it was rumoured he was coming home from the Hit Factory — untrue, but it cemented the place’s reputation.

The list of artists who followed Lennon into the Hit Factory is endless: Bruce Springsteen worked on Born in the USA in Studio One and Paul Simon merged African and Californian sounds for Graceland next door; a teenage Mariah Carey recorded one of her first hits there, Someday, despite refusing to talk to her producer.

The Hit Factory New York closed in 2005, its engineers relocating to a smaller facility in Florida. Michael Chapman, the building’s marketing agent, says there was little doubt what would happen next given the city’s sky-high property prices.

“Once we had unblocked the windows and looked up at the 11ft-high ceilings, we realised we had something special here,” he says. “It’s safe and fashionable, but there is a height limit on buildings so it also feels protected. People like its history, but of course they only buy because it’s a good investment. We have sold about 30% so far, but the demand for all the apartments is there.”

The development makes the most of the building’s legacy: the original signage for the Hit Factory shines above the entrance, while the interior lobby will be surrounded by steel- and-stone panels featuring a wall display of the gold and platinum records recorded there.

The flats themselves, which start at about £560,000 for a 1,100sq ft one-bedder, have oak floors and massive windows; the kitchens feature top-of-the-range appliances and “environmentally conscious materials”, while the master bathrooms have Kohler “Tea-for-Two” cast-iron baths. The penthouses have been carved out of a former recording studio with 30ft ceilings that spanned the entire top floor and had room for a 160-piece orchestra. There is also a 2,000sq ft roof deck with views of Manhattan.

The area, now known as Clinton (after a former New York governor rather than any past or future presidents), was once the site of much of the city’s notorious underworld activity, as well as the setting for West Side Story, but started coming up in the early 1990s. “Everything else in Manhattan has been overpriced: it was our turn to face the yuppie tide,” says a former English resident.

Thanks to the weak dollar, Chapman expects some British interest, especially from those looking for a fun place for weekends who are also able to find the 20% deposit that American mortgage lenders normally demand from foreigners. “Although Manhattan prices have levelled off, there are still many people wary of the stock market looking to invest in property,” he says. “And Manhattan remains a blue-chip investment.”

The building will be owned by its residents but, unlike many such blocks in New York, will not be run as a co-operative, sparing potential buyers an often humiliating “vetting” process by existing residents. So, for those rolling in it, it could be time to rock.

The Hit Factory, 00 1 646 613 2622, www.thehitfactorycondo.com

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