The Galleries That Transformed Chelsea Can’t Pay the Rent

A construction boom along Manhattan's popular High Line park has increased rents in West Chelsea, making it difficult for galleries to retain foothold

Ten years ago, a group of seven young art dealers opened galleries in former loading docks on a deserted cobblestone street, helping transform Manhattan’s Chelsea neighborhood into an art destination.

Now, only two of the galleries remain after the rest relocated or closed because of high rents. With leases expiring in November, both said they are likely to leave.

“It’s time to move to a new area and be part of a new story,” said Michael Gillespie, owner of Foxy Production, one of the two galleries. “Chelsea feels more blue-chip and less an area where you come to discover new artists.”

The U.S. contemporary art epicenter is in the middle of a transformation as small and medium-size galleries are being priced out of their expensive ground-floor spaces in Chelsea. As office towers and luxury homes rise up around the elevated public park the High Line, galleries are moving to neighborhoods including the Lower East Side and Chinatown.

People walk at the High Line Park toward the new Whitney Museum of American Art, back right, in New York, U.S., on Thursday, April 23, 2015. Photographer: Chris Goodney/Bloomberg

People walk at the High Line Park toward the new Whitney Museum of American Art, back right, in New York, U.S., on Thursday, April 23, 2015. Photographer: Chris Goodney/Bloomberg

Those that will be able to remain in Chelsea are high-end emporiums -- Gagosian Gallery, Gladstone Gallery, David Zwirner -- that own their buildings, brokers said. They learned a lesson from an earlier era: art galleries began moving to Chelsea in the 1990s after Soho, which they had helped revitalize, became unaffordable.

Like Soho

“Just like in Soho, galleries are the victims of their own success,” said Stuart Siegel, senior vice president at real-estate broker CBRE Group Inc. who specializes in Chelsea. “The galleries put Chelsea on the map. Then the world followed them.”

The Hudson Yards residential and commercial development rising on the district’s northern border will house Manhattan’s first Neiman Marcus department store in 2018.

Even Jeff Koons, the world’s most expensive living artist at auction, isn’t immune. He will leave his long-time studio in the next two years, according to Roy Bernstein, chairman of the board at Valeray Real Estate Co. that owns the property on the corner of West 29th Street and 11th Avenue. The company plans to construct a 30-story affordable rental building.

“We had offered them an opportunity to build something to their specifications on the same block, but that didn’t work out,” Bernstein said.

After 15 years in Chelsea, art dealer Zach Feuer moved to the corner of Orchard and Grand streets in downtown Manhattan. Photographer: Katya Kazakina/Bloomberg
After 15 years in Chelsea, art dealer Zach Feuer moved to the corner of Orchard and Grand streets in downtown Manhattan. Photographer: Katya Kazakina/Bloomberg

Koons declined to comment through a spokeswoman.

Less Sympathetic

“We are finding it less and less sympathetic to contemporary art galleries,” said Carolyn Alexander, co-owner of Alexander and Bonin gallery, which has been in Chelsea since 1997. “It’s crowded. They are putting up ugly buildings.”

Alexander said the gallery is looking for a new home in the flower district or Tribeca because its landlord of 18 years decided to turn the building into a residential complex. Next door-neighbor Andrew Edlin Gallery, which specializes in artists without formal training, is leaving as well.

“It’s all real estate-driven,” said owner Andrew Edlin. “I love my space in Chelsea but my space will be destroyed for luxury condos. I didn’t want to retreat to the upper floor in Chelsea.”

He’s moving into a 2,500-square-foot former restaurant-supply store on the Bowery, joining an expanding community of galleries anchored by the New Museum. On Aug. 19, more than 100 people packed Edlin’s raw space for a performance by Brent Green as the artist’s animated short films were projected on an exposed brick wall.

There are 124 galleries on the Lower East Side, up from 63 in 2010, according to Katie Archer, director of programs and services at the Lower East Side Business Improvement District.

Buy Downtown

CRG Gallery and Zach Feuer recently left Chelsea after 15 years because their latest home had been sold. CRG will open on Chrystie Street on Sept. 9 with a solo show by multi-media Brazilian artist Alexandre Da Cunha. Feuer partnered with downtown dealer Joel Mesler and opened a second-floor space on the corner of Orchard and Grand streets.

“If you are an emerging contemporary art gallery, the Lower East Side is the place to be,” said New York collector Peter Hort. “I go to Chelsea to see shows and support friends. I buy art downtown.”

10 Hudson Yards, left, stands under construction in New York, U.S., on Thursday, May 7, 2015. Photographer: Michael Nagle/Bloomberg
10 Hudson Yards, left, stands under construction in New York, U.S., on Thursday, May 7, 2015. Photographer: Michael Nagle/Bloomberg

Rents are slightly lower on the Lower East Side. Asking prices top at around $125 per square foot, said Evan Ruster, an independent broker, who has worked with many galleries in the area. In Chelsea, rent for a ground-floor space on “better blocks are in that $120-$150 per square foot range,” said Siegel of CBRE, who’s worked in the neighborhood for 20 years. In 2008, prices in Chelsea were $65 to $90 per square foot.

“The math becomes untenable,” said Todd Levin, director of Levin Art Group, who advises collectors.

Rent, Fairs

Some galleries with the ground floor in Chelsea are looking for upper floors downtown, dealers said.

“Being on the ground floor is not your only footprint,” said Gillespie of Foxy Production, who is negotiating a lease on the second floor in Chinatown.

Art fairs are playing a growing role as a revenue source. Sales at these shows accounted for 40 percent of all sales by dealers in 2014, up from 33 percent a year earlier, according to the latest figures by the European Fine Art Foundation.

“I am still trying to figure out what makes sense,” said dealer Derek Eller, who has been in Chelsea for 10 years. “Should I spend an extra $100,000 on rent or on traveling to art fairs? Every dollar matters.”

Downtown Credentials

Downtown credentials also appeal to some blue-chip Chelsea galleries. Marianne Boesky runs Boesky East on Clinton Street. James Cohan Gallery, which has a 6,000-square-foot space in Chelsea, will open a 2,900-square-foot gallery on Grand Street in October.

“No one wants to become a dinosaur,” said James Cohan. “We thought there is fresh energy on the Lower East Side.”

As emerging art galleries are priced out, those with deeper pockets see Chelsea as an opportunity.

Eli Klein, co-owner of Klein Sun Gallery, which specializes in Chinese contemporary art, moved from Soho last year.

“In China, they recognize it as the center of the art world,” he said. “Chelsea is a brand to them.”

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