DOWTOWN’S commercial real estate sails are lufting business activity, including tourism, continues in the doldrums.

The lack of tourism, and reluctance by those visiting Ground Zero to do much shopping downtown, has affected the bottom lines for retailers and restaurants, as well as hoteliers. But that also means cheap subleases, eats and sleeps are on tap.

The greatest office leasing activity is among smaller firms that are extremely price sensitive, so Downtown grants become compelling.

“Lower Manhattan remains the third largest and third healthiest market in the country but it is still not a happy story, “said Carl Weisbrod, president of the Alliance for Downtown New York.

Class A office rents are in freefalls from their Year 2001 highs in the mid-$40s to mid-$50s, and vacant quality space is abundant.

Downtown offices can be had in the mid-$30s in nearly any property, with lower rents for older, shall we say, less-endowed properties.

Paul V. Ippolito, a broker with Newmark & Co. said, “In the last month, we’ve seen an increase in activity, ever so slightly, but only because of the amount of space and aggressive deals. Trinity Church, which owns several office buildings in the west side Hudson Square area just north of Canal St., is still holding its high $30s pricing, while waiting for the market to improve, but subleases there abound. Large blocks and numerous small offices and retail spaces can be found in properties that range from the historical Woolworth Building to cast iron SoHo lofts, NoLIta’s hot shopping and restaurant district to the modern glass towers at World Financial Center where one large block may be absorbed by the Oppenheimer Funds.”

Richard Hodos of retail specialists Madison HCDG, is working on a restoring plan for the WFC, and is targeting major retailers that include a department store. Store leases there will go for $50 to 120 a foot, but Hodos said, “Good deals will be made for the first ones in.”

Investors are still trying to buy office buildings said Richard Baxter, the Insignia/ESG investment broker.

“There is still a tremendous amount of interest for Downtown product,” Baxter said. “Any property leased up for at least the next five years is the most sought after.”

Insurance money is driving the construction of developer Larry Silverstein’s 750-foot tall, 1.7 million-square-foot replacement for Seven World Trade Center. It is also a so-called “green” building that will open for tenants by late-2005. Among the first occupants could be the Port Authority. They could also occupy a portion of the Daniel Libeskind-designed “Freedom Tower,” while Gov. George Pataki declared his office would be the very first tenant.

The memorial competition is also underway with thousands of entries expected from around the world.