Just when you think that all the "smart" real estate dollars are headed for Atlanta and Phoenix and the rest of the toasty Sun Belt, it turns out that some investors are putting healthy sums into the frozen turf of the Midwest and Northeast.

Stepped-up Frost Belt investment "is something we started noticing 2 or 2 1/2 years ago" after a decade of southern allure, said Jay Strauss, president of B. B. Cohen & Co., a Chicago-based mortgage banking firm. "I would say that in the last 18 months it's really been more dramatic . . . Just look at some of the major cities in the North that five years ago people said were dead.

You have Renaissance Center (a multiuse complex) in Detroit; you have downtown Philadelphia, which has undergone remarkable development; and you have downtown Boston, which is undergoing tremendous redevelopment now."

And in Manhattan, where office space a few years ago was selling for $40 a square foot, annual rent for office quarters now has hit that figure, Strauss said.

Strauss is not alone in his observations. Samuel Zell, a Chicago real estate investor, sees opportunity in such cities as Minneapolis, Des Moines, Pittsburgh and Columbus, Ohio.

"If were a builder or in the leasing business, or if I were writing mortgages, I would want to be in the Sun Belt because that's where the volume of business is the highest," Zell said. "But if you want to be a passive investor, the market has tilted, making Snow Belt properties very cheap in relation to the Sun Belt."

Both Strauss and Zell like Chicago. "I think Chicago, of all the cities in the North, has always had the best climate for real estate development because it has had the most stable political base and commuter system," Strauss said.

Those who see merit in northern real estate investment make the following arguments:

Public transportation systems exist. The same cannot be said for all Sun Belt cities.

The absence of unions in the South and Southwest has been a lure to industry, but the days of cheap labor may be ending.

Once-cheap construction costs are getting more expensive in the Sun Belt, and easy building codes are becoming more stringent.

Older cities in the North finally have begun to compete with their southern counterparts by offering development incentives.

Established areas are less prone to the volatility of boom-and-bust cycles that high-growth areas are subject to. There is also less competition from new projects.

Older urban areas, though they have been experiencing declining populations in recent years, still offer a heavier concentration of people than Sun Belt cities.

Strauss cited as an example Chicago Ridge Mall, a regional shopping center under construction in southwest suburban Chicago Ridge. "You've got a population here of 450,000 within a 2 1/2-mile radius," he said. "The developer, the mall's tenants, Sears (the anchor tenant), and lenders were convinced it would work with that kind of concentration."

One Chicago real estate executive said that population declines must be examined on a city-by-city basis. In some cases, from a real estate investor's standpoint, "zero growth could be a lot better than low-income growth," he said. "Similarly, employes of growing service industries may be more desirable as real estate consumers than the blue-collar workers who have left with industry."

Strauss, for one, believes that opportunities exist for investors interested in central city office buildings and development of residential properties, particularly condominiums. He also thinks that industrial real estate has a future in Frost Belt cities that are well-managed.

"I think we'll see manufacturing start to come back," he said, "and if not manufacturing, certainly distribution."

Strauss believes that for this investment to take place, however, an area must have upgraded transportation, education and safety -- no small items for some northern cities still plagued by problems that helped spur an exodus of real estate investors in the first place.

Strauss thinks that institutional investors are the ones showing the most interest in the Snow Belt.

"Individual investors I think still tend to like the Sun Belt principallly because many of them are looking for an excuse to write off vacations," he said.