Tal Nealy waited in line outside one of the new nightspots in Adams-Morgan. He and a friend, also from the University of Maryland, had come to the Washington neighborhood best known for its numerous international restaurants and summer street festivals.

Thousands of young professionals drive to the Northwest neighborhood each weekend to dance at the New York-style Cities or the architecturally elegant Dakota.

"This is the new place to be," said Nealy, 25. "Most of us are from American University, George Washington, Georgetown and the University of Maryland. It is a single and yups place."

The flashy clubs, Cities and Dakota, are clearly defining a new image for Adams-Morgan. Unlike some of the longtime neighborhood bars such as Millie and Al's, where the dress is blue jeans and the talk is sports, the new nightclubs draw women in leather miniskirts and fur coats and men in nicely tailored suits.

Adams-Morgan's transformation from quaint enclave of ethnic diversity to a center of increasingly upscale restaurants and expensive housing concerns some residents and community leaders.

D.C. Council Chairman David A. Clarke, who lives in nearby Mount Pleasant, calls the changes "the Georgetownization of Adams-Morgan."

"Its diversity has bred its own destruction. About the time it became attractive, everyone was attracted to it," Clarke said. "The result is the income needed to live there rose. Now the storefronts are yielding to this avant-garde disco business represented by Dakota and Cities."

Many residents and business owners interviewed were concerned that the hot real estate market in the century-old community that surrounds 18th Street and Columbia Road NW would hasten the ongoing displacement of low-income people including the elderly and Latino immigrants.

Others were worried that soon there would be no place to shop for groceries or buy everyday items because restaurants and bars are replacing more traditional neighborhood businesses. And everyone was concerned about traffic jams and parking problems exacerbated by the clubs and the more than 100 restaurants that draw people from throughout the Washington area.

"I live here because it is an international neighborhood," said Maria Harris, 24, who works at Adams Elementary School. "But places like Cities and Dakota mean we have become the new hangout neighborhood for people who are tired of Georgetown. I'm afraid all this new development will end up squeezing out the cultural diversity that makes this neighborhood attractive."

Gentrification is evident throughout Adams-Morgan, the boundary of which is 16th Street to Harvard Street to Rock Creek Park to Connecticut Avenue to Florida Avenue NW. But it is most obvious at the Imperial, a 36-unit apartment building at 1763 Columbia Rd. NW that a coalition of black and Hispanic tenants tried desperately to buy in the early 1980s. Their efforts failed when government financing of the project fell through.

Now workers are busy converting it to luxury condominiums with office and retail space on the first three floors. The nearby Beacon building, wedged between Calvert Street and Adams Mill Road NW, was recently converted to condos, as was the Kalorama Corner a few blocks away on 18th Street NW.

Ed Morgan, one of the neighborhood's largest land owners, plans to build a hotel-office-theater-apartment complex on an acre of parking lots he owns on 18th Street and on Champlain Street NW. His architectural model, which is similar to Faneuil Hall in Boston and Harbor Place in Baltimore, shows a glass-covered walkway lined with small shops leading from 18th Street to the proposed hotel at the rear.

Morgan has just completed renovating the old National Roller Skating Rink at 17th Street and Kalorama Road NW, and it is now a spacious film studio. He is also expanding his New Orleans Emporium, one of the neighborhood's first expensive restaurants, and plans to create two more restaurants in an adjoining building.

For Dennis Gale, a gentrification expert at George Washington University and the author of a new book titled "Washington, D.C. Inner-City Revitalization and Minority Suburbanization," Adams-Morgan and Georgetown have ceased to be real neighborhoods and are actually "metropolitan commercial centers" or "nightlife centers."

"On any given night, they draw a substantial share of patronage from people outside the area," he said. "Georgetown and Adams-Morgan offer the suburbanites something that will draw them in -- they offer specialty goods and services. The very attractiveness of the place becomes its undoing."

Many residents and business owners interviewed hold out hopes that Adams-Morgan will never have the problems that have plagued Georgetown for the past decade: crowded sidewalks, street crime and rowdy youngsters. They said the sidewalks are too narrow to encourage youthful crowds to loiter and there are few businesses such as fast-food restaurants to attract them. Some said they believe the 3rd District police are doing a good job of handling the bumper-to-bumper traffic on weekend nights as well as discouraging rowdiness.

And George Frain, the secretary of the local business association, said he feels very strongly that Adams-Morgan will maintain its socioeconomic mix because of the church-sponsored Jubilee Housing project that has led to the purchase of nine apartment buildings with 300 units for the exclusive use of low-income residents.

The owners of Dakota and Cities view their clubs, which opened last summer, as pluses for the neighborhood.

"Adams-Morgan used to have more diverse entertainment 10 years ago than it does now," said David von Storch, 29, owner of Dakota, which also has a restaurant. "We feel we are filling a gap."

Dakota is located in the old Avignone Freres building at 1777 Columbia Rd. NW. Von Storch said he spent more than $1 million to renovate the 80-year-old building, including extensive soundproofing.

"We feel we have been very sensitive to the concerns of the community," he said. "We attended {Advisory Neighborhood Commission} meetings to address concerns of noise, trash and parking. Since we opened seven months ago, we have received only one complaint and that was about the noise from dumping trash at 4 a.m. We no longer dump trash after 1 a.m."

ANC Chairman B. Harold Smith said von Storch and Sahir Erozan, the owner of Cities, have responded well to community concerns about their businesses.

Cities, at 2424 18th St. NW, is Erozan's second nightclub in Washington. He also owns Club Med in Georgetown, which is closed for renovation.

"We only want to help this neighborhood," Erozan said. "Everyone said I was crazy to come to Adams-Morgan because there would be no clientele here and no parking. I said we could make it and we have. This is prime property. We are uptown here."

Erozan, 29, said he spent more than $1.5 million to renovate the building that most recently had been a dance studio. He put in a second floor for dancing and has a restaurant and bar on the first floor. Every four months, he said, he spends about $40,000 to change the decor of the restaurant to feature a new city.

Smith calls the two clubs "the backbone of {recent} change" in the neighborhood.

But he said the increasing popularity of his neighborhood is a direct result of the two community festivals, Adams-Morgan Day and the Hispanic Festival, that each year draw thousands of people.

"They have brought more attention to the community and the result of that is it has precipitated lots of changes," he said. "Visitors find us quaint and think this is a neat place. That leads to people moving in, young people coming in to buy condos. It is the marketplace that is changing this community."

Gladys Carlo, owner of the clothing store Los Carlo at 1748 Columbia Rd. NW, is sure she is seeing the slow death of the Hispanic community in Adams-Morgan. Carlo, now a U.S. citizen who arrived in Washington 20 years ago from Ecuador, remembers the mid-1970s when "everything was Spanish from Mount Pleasant to 17th Street."

"But we are the minority here now," she said. "We don't have the support of the government. They only care about the big people, the rich people. We are just the small people. We have nobody to support us.

"There are fewer places for anyone to live in this neighborhood," Carlo said. "My customers are all Hispanic and they come from other parts of the city or from Maryland. They used to live here; now they return here to see the old neighborhood and shop."

Doug Lang, the interim dean of the Corcoran Art School, has lived in Adams-Morgan for three years but says he may move to another neighborhood.

"I find it an uncomfortable place to live," he said. "What is happening here is a microcosm of what is happening in the whole country. There is a lot of money moving in. It is a case of the haves and have-nots."

"Places like Cities and Dakota are for people who have money to spend, and then there are other restaurants for people who are obviously not in such good shape, the blacks and the Latinos," Lang said.

Gale, the professor and author, holds out little hope for Adams-Morgan to continue as the "melting pot" neighborhood.

"Adams-Morgan's days as an ethnic and income-mixed neighborhood are numbered," he said.