For decades, property owner Jack Sumski’s retail space along the first block of Taylor Street was a microcosm of the problems facing San Francisco’s drug-riddled lower Tenderloin: Tenants included a 4,000-square-foot pornographic theater, a bar and a liquor store that specialized in malt liquor and was a magnet for dope dealers, he said.

But now, Sumski is hoping the five-story building will become ground zero for a new arts district Mayor Gavin Newsom is pushing on lower Taylor Street. Sumski has signed an 8,000-square-foot lease with the Gray Area Arts Foundation, which will replace the old adult theater, bar and liquor store, which are slated to close in June. Gray Area’s complex, stretching from 55 Taylor St. to 67 Taylor St., will include an art gallery, artists’ studios, new-media lab, cafe and artists’ boutique.

Sumski, who is 84 and has owned the property since 1981, is investing more than $1 million for tenant improvements in the building.

“I figure it was time to do something in my old age to get something going down there,” said Sumski.

Gray Area Director Josette Melchor said the first phase of construction — the gallery and resident-artists program — should be open by the end of June. She said the impact of opening should be dramatic.

“Our shows draw 300 people every month, so we’re going to really start to see some change there when we get in there,” said Melchor. “I know that I personally am invested in making this happen.”

The immediate vicinity already has a strong cultural backbone. The Golden Gate Theaterdraws Broadway musicals to 1 Taylor St. The Warfield Theater at 982 Market St. is now managed by AEG Live, billionaire Philip Anschutz’s entertainment company. Other arts organizations already in the neighborhood include Exit Theater at 156 Eddy St. and 227 Taylor St. and the Luggage Store art gallery at 1007 Market St.

Amy Cohen, who is advocating the arts corridor idea for the Mayor’s Office of Economic and Workforce Development, said six property owners along the three blocks of Taylor Street targeted for improvements have started major renovations.

“What is striking about the situation on Taylor Street is that property owners and business owners have started doing this on their own,” she said. “Then it’s just a matter of marketing — changing people’s negative perceptions of the area.”

That may be tough. Lower Taylor Street is still plagued by drug dealing and property owners have had trouble landing tenants. The 45,000 square feet of office space at 25 Taylor St. — which, like the Golden Gate Theater next door, is owned by the Shorenstein family — has been empty since Employeeservices.com went belly up during the dot-com crash eight years ago. The 40,000-square-foot Warfield office building next to the theater has been largely vacant since the San Francisco Examiner moved to 450 Mission St. in August 2004. Original Joe’s restaurant at 144 Taylor St. has been closed since a fire damaged it in September 2007.Seligman Western Enterprises just landed a 9,000-square-foot tenant for the 100,000 -square-foot 1035 Market St., a Class A office building that had been empty since it was redeveloped in 2002.

Shorenstein Executive Vice President Tom Hart said the company has been in discussions with a number of arts organizations interested in leasing 25 Taylor St.

“I am very hopeful,” said Hart. “The overall economy overshadows a lot of things, but notwithstanding I’m hopeful we can come up with group of arts organizations that are looking for a longer-term home.”

David Addington, who owns the Warfield buildings and 1028 Market St., said he is negotiating with several promising tenants, including a high-profile restaurant that could move into the Warfield building. Between the arts corridor gaining momentum and recent Market Street police patrols, he is cautiously optimistic the area may finally turn the corner.

“The feeling on the street is vastly different in these past 12 months,” he said. “The police are doing their job, the city is doing its job. It’s up to property owners now to put stuff in that is going to be fun and make this area an interesting place to shop and live.”