August 11, 2022

Square Feet: Art Groups Preserve Chelsea by Buying, Not Renting

Many argue that it happened in Greenwich Village, and most point to SoHo as the quintessential example of the phenomenon. Now, the same pattern may be occurring in Chelsea, where an explosion of residential development along the High Line is attracting retailers serving new residents — retailers who are now competing for space with the hundreds of art galleries that are the backbone of the neighborhood.

But some real estate experts say Chelsea’s fate may be different, because a healthy number of the neighborhood’s arts businesses had the foresight to buy their gallery and studio spaces, rather than lease them.

“The difference between SoHo and Chelsea is that so many artists, or even art companies or art investors, bought condos in Chelsea, so they actually made investments as opposed to leasing,” said Barbara Byrne Denham, the chief economist at Eastern Consolidated, a commercial real estate brokerage.

“I think that will preserve their spaces, and the flavor of Chelsea as kind of an art mecca,” she said.

Ms. Byrne Denham said there could be as many as 350 art galleries in Chelsea. Enough of them own their space that in a recent report on the commercial property sales market in Chelsea, Ms. Byrne Denham said, “we had to separate them as their own property type.”

“I said, ‘There’s something in this that really stands out: the fact that so many properties sold as art studios, art condos and art buildings,’ ” she said.

In 2008, the sales volume in that sector peaked at about $105 million, then activity froze with the financial crisis, according to the report. Sales activity in arts-related properties recommenced in the latter half of 2010.

Before 2007, arts-related sales activity in Chelsea was much slower, with about two properties changing hands a year between 2003 and 2006, Ms. Byrne Denham said. Much of that space is in former industrial buildings that were converted as artists and art galleries left SoHo in the mid-1990s.

Many of Chelsea’s arts sales in 2007 and 2008 were fed by one developer, Youngwoo Associates, which built the Chelsea Arts Tower, a 20-unit commercial condominium at 545 West 25th Street.

The building took just over two years to sell out, beginning at prices of about $700 a square foot and peaking at prices of more than $2,000 a square foot in 2007, said Margarette Lee, a principal with Youngwoo. Then prices fell, as they did throughout Chelsea, though they have now returned to about $1,200 a square foot, she said.

Ms. Lee said that planning for the Chelsea Arts Tower began as far back as the mid-1990s, when the developer acquired the lot in Chelsea.

“All these galleries were being ousted by retailers in SoHo, and they came to Chelsea, and they started buying their real estate, because everywhere they go, the neighborhood gets really nice, and the rent goes up so high, they have to leave,” she said. “We saw that and went in early and said, ‘I think a lot of these art-related businesses would want to buy instead of rent.’ ”

Initially, the Chelsea Arts Tower was aimed only at galleries, but developers soon found out that relatively few galleries had the capital to purchase a condo. “You had to be an established gallery to buy,” Ms. Lee said. “There are many more struggling galleries than successful galleries.”

Ms. Lee said that about half of the Chelsea Arts Tower was art galleries, most of which came not from SoHo but from the 57th Street area, a part of Manhattan popular with the interior design industry. The rest of the tower’s units are devoted to fashion- and arts-related businesses.

Relatively few of the units have resold. “Maybe four at the most,” Ms. Lee said.

Part of what has kept real estate developers and retailers at bay so far in Chelsea is special zoning created by the city in the 1990s, which helped preserve Chelsea’s low scale and kept commercial mixed in with residential, mostly in midblock areas of 24th through 27th Streets. As well, the area’s relative lack of mass transportation has discouraged widespread residential development, real estate experts said. While SoHo has many subway lines running through it, creating ample foot traffic, gallery-hoppers — and potential shoppers — have to go out of their way to get to Chelsea.

Article source: http://feeds.nytimes.com/click.phdo?i=435c996ed995873938e9335c3608c82f

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