Barry Friedman has owned a gallery on the Upper East Side for 36 years. “When I started, at Madison Avenue and 68th Street, the rent was $1,025 a month and there were over 30 galleries up here,” Mr. Friedman said recently from his current gallery nearby. “Now, boutiques, banks, and jewelry stores crowd out the art dealers.” So this summer, he is set to move his gallery, which specializes in 20th-century and contemporary design, into a duplex on West 26th Street. “Chelsea is where the action is,” Mr. Friedman said. He is working on his new 9,000-square-foot gallery with the gallery’s director, Marc Benda.

Several other major design galleries, some with interior renovations costing millions, will open in Chelsea this month. The neighborhood, already home to more than 300 contemporary art galleries, is also fast becoming the city’s center of high-end 20th-century and contemporary design.

“Today’s generation of collectors want a new version of antiques and they shop in Chelsea,” a Latin American art dealer who owns a gallery in the Fuller Building at Madison Avenue and 57th Street, Ramis Barquet, said. Mr. Barquet opened a design showroom at 601 W. 26th St. a year ago. Now with a new partner, Alex Vik, a Norwegian-born and Monte Carlo–based investor, Mr. Barquet plans to expand to another Chelsea space. The new gallery, at 544 W. 24th St., will open in a few weeks. Architect Enrique Norten designed the space, which according to Mr. Barquet has cost about $800,000 in construction. Mr. Norten also designed the Brooklyn Public Library’s new Visual and Performing Arts Library and won the 2005 competition to produce the design for the Guggenheim Guadalajara.

Meanwhile the auction market for 20th-century design is booming. “The design market is heating up,” the director of 20th-century design at Sotheby’s, James Zemaitis, said. “When I joined Sotheby’s in 2003, the auction house did less than $500,000 in sales for design dating from postwar to today. Now I would roughly estimate that we are doing $10 million to $12 million in a year, and that’s a huge hike.”

Dealers are responding to the boom by moving into considerably larger quarters. Audrey Friedman shuttered Primavera Gallery on the Upper East Side, which had showcased predominantly vintage jewelry and glass since 1971, the last week in December. “It was time to reinvent ourselves,” she said. “The action is no longer on Madison Avenue, which is packed with clothing boutiques, but downtown.” She and her husband, Haim Manishevitz, are opening a new gallery on Eleventh Avenue in March. The new space will boast three times the square footage of her Madison Avenue space, offering furniture as well as glass and jewelry from the early 20th century to the present.

One example of how high prices are climbing comes from Australian designer Marc Newson’s riveted aluminum “Lockheed Lounge.” The prototype for the lounge, produced in an edition of 10, occupies center stage at Sebastian + Barquet’s 26th Street showroom. Four years ago, a similar “Lockheed Lounge” by Mr. Newson sold for $105,000 at Christie’s New York, while the prototype sold at Sotheby’s for $968,000 last June.

Now the price has leapt to $2.5 million, and Mr. Barquet has already received offers from potential buyers. “I would make money on the sale, but it’s a museum piece and I’m holding on to it for a better offer,” he said. His new gallery on 24th Street will open January 25 with a show of vintage furniture by Mr. Newson.

That same day, Gagosian Gallery will open a show across the street dedicated to Mr. Newson’s latest work. The Gagosian show, the gallery’s first ever New York show devoted to design, will feature Mr. Newson’s limited-edition marble furniture. Prices for tables and chairs range between $100,000 and $400,000. “The show will simply get more serious art collectors interested in design,” Mr. Benda said. It may also raise prices at Mr. Barquet’s Newson show across the street.

The Newson shows demonstrate a growing interest in editioned pieces of furniture by brand-name designers. Mr. Friedman held a 10-day show dedicated to the Israeli-born, London-based Ron Arad in a temporary space on West 26th Street last September. The show produced substantial sales, including 15 silicon and acrylic chairs priced between $55,750 and $260,000. “The majority went to contemporary art collectors.” Mr. Benda said, “some with Richard Prince paintings.”

The craze for new, editioned design also was demonstrated last month at Design Miami, a two-year-old design fair held in early December to coincide with the much larger art fair Art Basel Miami Beach. “That area really took off in Miami,” Mr. Friedman said. Friedman & Benda sold 40 such pieces at the fair, where Mr. Newson was named designer of the year.

Mr. Barquet, too, is focusing on new furniture by well-known designers. “By the end of this year, I will have exhibited furniture by four important designers,” he said. He declined to name them, but said he has already enlisted Mr. Norten to design the architect’s first line of furniture.