Up-and-Coming Neighborhoods: Great Buying Opportunities

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"It's becoming a beautiful place if you want a lot of space and have a young family and like the Soho-style loft living arrangement," he said.

Cray says the real estate downturn has created new buying opportunities. Bushwick has an increasing number of foreclosures, which are rare in Manhattan and more gentrified Brooklyn communities.

Greg Esser, an artist who also rehabs spaces for artists in Phoenix, said Arizona's real estate slowdown is welcome news for artists there. He said Phoenix artists have learned from the mistake they've made in the past of renting their space. More and more of them are buying houses and studios as a way to protect their investment and avoid the possibility of displacement.

Artists during the past decade have helped to revitalize downtown Phoenix, particularly Roosevelt Row and Grand Avenue, which are now lined with galleries.

"From my perspective the downturn creates new opportunities for artist ownership," said Esser. "We were on a path of dramatically escalating real estate costs."

Early Adopters

The lack of affordable space is the main problem in many large cities. Young artists have been priced out of most neighborhoods in Washington, which doesn't really have the kind of warehouse districts that artists tend to gravitate toward, said Anne Corbett, executive director of the Cultural Development Corp., which is working to develop affordable space for D.C. artists.

Some artists have moved to Baltimore, a much less expensive city with many warehouses that's only about 45 minutes away. Others have moved to art-friendly suburbs such as Mount Rainier, Md., just outside the city.

Corbett said some artists have begun moving to the Atlas District, a mile north of Union Station, a neighborhood that developed a nightlife scene in recent years after decades of crime and blight.

"Artists send the signal," said Corbett. "The artists are the early adopters.…They do it in real estate the same way they do it in fashion, furniture design, and graphic design."

Click here to see 15 of the nation's up-and-coming neighborhoods.

Gopal writes about real estate for BusinessWeek.com in New York.