March 15 (Bloomberg) -- In another sign of the bull market in art, the vast Gagosian Gallery empire is about to get even bigger.

Already the art world's leader in exhibition space, Gagosian Gallery is converting a warehouse into a gallery in New York's Chelsea district. This would be Gagosian's fifth gallery worldwide, its third in New York, and its second in Chelsea, the city's contemporary-art mecca.

``Even without opening another gallery, they have the largest repertoire,'' said Daniella Luxembourg, a private art dealer and former president of auctioneer Phillips, de Pury & Co. ``They are the largest in terms of the space and the shows they are doing.''

Gagosian also has galleries in London and Beverly Hills. The existing Chelsea outlet is 26,000 square feet located on West 24th Street. The new outpost, at 528 W. 21st St., comprises 9,200 square feet, according to the company that owns the building and the documents it has filed with the New York City Department of Buildings.

It's a one-story, graffiti-sprayed brick-facade building, formerly occupied by Manhattan Laminates Ltd., a woodworking- supplies company.

Gluckman Mayner Architects, which designed the Gagosian Gallery on West 24th Street as well as Chelsea galleries of Mary Boone, Paula Cooper and others, filed two applications with the New York City Department of Buildings to conduct interior demolition and renovation of 528 W. 21st St. Estimated costs so far under all demolition and renovation permits total $690,000.

`10-Year Lease'

Gagosian Gallery, which is customarily tight-lipped with the press, declined to comment on the space or its purpose.

The building's owner is real-estate company Leslie J. Garfield & Co. The company's Jed Garfield said Gagosian Galley has ``a 10-year lease'' on the property and has taken ``the whole building.''

Contemporary art has been hot, with auction sales in the category at Sotheby's Holdings Inc. last year up $46.6 million, or 13 percent, from the year before. That was most of the publicly traded company's $58.9 million increase in auction sales and related revenue for 2005. In February, Sotheby's contemporary-art auction in London brought in $71 million, a 69 percent increase from last year's London contemporary sale. The Armory Show, New York's largest contemporary-art fair, closed Monday after an expected surge in attendance of as much as 25 percent, according to Pamela Doan, the show's communications director, who doesn't have final figures yet. Attendance last year was about 40,000.

Chelsea Expands

Other Chelsea galleries have been expanding in the past year. Matthew Marks Gallery opened its fourth branch in November, and Perry Rubenstein Gallery opened its third in September. PaceWildenstein gallery added a second showroom in October, and Friedrich Petzel opened his second Chelsea space in January to show the works of younger, emerging artists.

Gagosian's expansion ``has a lot of significance since Gagosian is the most powerful contemporary art dealer in the world,'' said Christoph van de Weghe, a former Gagosian staffer who now owns a gallery on West 23rd Street. ``For him to get a second gallery in Chelsea is a statement of how strong the business is and how much there's demand from people to buy contemporary art.''

To contact the reporter on this story: Katya Kazakina in New York at kkazakina@bloomberg.net.

Last Updated: March 15, 2006 14:02 EST