Washington Heights — Less than a month after she opened a Liberty Tax Service franchise on 164th Street and Broadway in January, Michelle Bodner was thinking of shutting it down.

Washington Heights is an immigrant-dominated neighborhood with a deep-seated suspicion for government agencies, and convincing locals to file tax returns would be hard. Bodner faced a language barrier—she didn't know much Spanish, the most widely spoken language in the neighborhood. And she was annoyed with tickets she received for trash trapped under her car, and a signage she left outside.

But Bodner decided to hold out a little longer. She didn't have to wait long. Bodner's franchise—the first for Liberty Tax Service franchise in Washington Heights and Inwood—ended up recording among the highest tax returns of the 16 Liberty Tax Service franchises in New York City in 2011. Bodner now plans to open five more franchises in Washington Heights and Inwood by 2013.

"It was a challenge, but I eventually realized that some communities have a pulse, others don't," Bodner said. "And Washington Heights and Inwood definitely have a pulse."

At a time when reports on the economy rarely bring good news, Washington Heights and Inwood are emerging hubs of economic opportunities and growth. Big companies that ignored the neighborhoods as potential markets in the past are now targeting them for development. Corporate offices are jostling for real estate office footholds with entrepreneurs and professionals from across the city. And the local population is slowly moving from bodegas and mom-and-pop shops to managerial and business jobs that were rare here but are now increasing in the neighborhoods.

The combination of lower rents, an aspiring labor force and a relatively untapped market—at a time companies and individual professions are looking for any economic advantage available—is acting as a catalyst for the change.

But a crunch for office space and repeated "why Washington Heights" questions are also a part of the bargain. And despite the changes, the unemployment rate remains high.

White-collar in Washington Heights

At the nine-storey Inwood Center that occupies an entire block between 213th and 214th streets, and Broadway and 10th Avenue, Jason Miller is witnessing a piece of this transformation every day. On a Friday afternoon, Miller's Blackberry beeped every few seconds, as mid-size firms, entrepreneurs and professionals asked him about office space in the commercial plaza, owned by Edison Properties. Outside his glass-paneled office on the sixth floor, two clients who came late for a meeting waited as he answered calls.

Faced with a massive unmet demand for space, Edison Properties opened up 42 new office space slots at the center early November to add to 91 that are already occupied. But even with the new space, Miller has more clients than he needs.

"We saw a need to build a space for bright, strategic entrepreneurs and here we are, doing great," said Lenny Lazarino, vice president of Edison Properties. The company, Lazarino said, researched the neighborhood, interviewed dozens of residents, business owners and entrepreneurs and even looked for potential competitors. "We did not find anything similar in nature to what we planned for the Inwood Center, which was to be a multi-faceted facility offering a place to store, park, work or operate a retail store under one roof."

Many of their clients were initially from the neighborhood, Lazarino said. But as the center's tenants started talking about the plaza to their friends elsewhere in the city, the prospect of state-of-the-art office facilities at lower rents started drawing clients from other parts of New York City, he said.

"You can feel the change in the business environment in Washington Heights and Inwood," said Barbara Martinez, manager of the neighborhood chapter of the NYC Business Solutions, a city agency under the Mayor which helps new businesses get started.

According to the latest census data, the number of white-collar jobs in sectors likes information technology, finance, management, and other professional and scientific areas in Washington Heights and Inwood has doubled from 10,173 in 2000 to 20,038 in 2010.

The total number of jobs in the neighborhoods has also risen 31 percent since 2000, though the population has remained almost constant, registering a tiny dip from 208,414 to 208, 215. The unemployment rate for the neighborhoods is still significantly more than the city average of 9 percent, but has declined from 14.3 percent to 13.5 percent since 2000, at a time when it is increasing elsewhere.

Rent a double-edged sword

One of the most visible signs of change for the community came in August when AT&T opened its first showroom in Washington Heights. The telecom giant, like Bodner at the Liberty Tax Service franchise, turned to NYC Business Solutions for help in hiring locals.

"These companies have proven track records, strong, national brands and the funding necessary to be successful within Washington Heights," said Angelina Ramirez, executive director of the Washington Heights Business Improvement District. "They also provide the services the community wants and needs."

The influx of national and mid-size companies, professionals and entrepreneurs into Washington Heights and Inwood means that the struggle between a growing demand and availability of commercial space that Miller faces plays itself out across the neighborhoods.

The Washington Heights and Inwood Business Improvement District and NYC Business Solutions are counting on a $180 million dollar renovation of the George Washington Bridge Bus Station, which the Port Authority has started work on, to add commercial space. According to the Port Authority, the renovated bus station will offer 120,000 square feet of commercial space as opposed to just 30,000 square feet at present.

SJM Partners, the Florida-based real estate development firm that is working with the Port Authority in a public private partnership on the renovation, announced end-October that it had signed leases with discount apparel retailer chain Marshalls, supermarket chain Fine Fare and the no-frills gym chain Blink Fitness. The neighborhood has no major discount apparel chain, and only one national supermarket chain—a Pathmark—for more than 208,000 residents.

In October, the Washington Heights Business Improvement District started an elaborate new initiative to minimize the time businesses interested in coming to the neighborhood spend in searching for commercial space.

Under the initiative, the Business Improvement District will conduct monthly surveys of all commercial rental vacancies within Washington Heights and compile a database with information about each vacancy, like the area available, the realtor's contact details and the cost of the space, Ramirez said. This database will then be used to help direct new businesses to vacant commercial spaces best suited to their needs.

But the vacancies in commercial space that the Business Improvement District plans to record also reflect a subtle tension in the business environment of these northern Manhattan neighborhoods.

Between 5 and 10 percent of mom-and-pop shops—small, privately owned businesses with few employees and a low sales volume—in these neighborhoods have closed down since the start of the recession late in 2008, according to Washington Heights Chamber of Commerce President Peter Walsh, even as big businesses enter and the number of professionals and entrepreneurs rises.

Though there is no direct link between the two simultaneous yet diverging trends, the struggle faced by mom-and-pop shops because of the economy serves as a reality check amid the euphoria over the neighborhoods' growing attraction as a destination for outside firms and professionals say community groups working with small businesses.

One change that could be a factor in both the entry of big businesses and white collar jobs, and the crisis the mom-and-pop shops are facing, is a demographic shift the neighborhoods are witnessing. The 2010 census has shown a 14 percent decline in the Hispanic population of the Washington Heights and Inwood—mostly replaced by white residents.

Deborah Balk, a spatial demographer and professor at the School of Public Affairs, Baruch College, City University of New York, said demographic shifts do influence business environments of neighborhoods, though she clarified that she hasn't studied Washington Heights and Inwood specifically. "As the composition of a neighborhood changes, businesses change based on the preferences of those living the neighborhood," Balk said. "New services come in."

There has been no sudden spike in the increase in commercial rent with the entry of big businesses willing to pay higher rates, according to Gus Perry, co-owner of Stein-Perry Real Estate, Inc. But even regular increases in commercial rent have proved hard to survive for small businesses already reeling under the economy.

Selective success?

The unemployment rate also remains a cause for concern for community activists like Richard Espinal, executive director of Centro Altagracia, a non-profit that focuses on social justice for the most vulnerable residents of Washington Heights.

"Sure, overall, things have improved," Espinal said. "But I'm not sure they've improved that much." Espinal said he still saw neighborhood residents who had lost jobs in the economic slowdown, and other Dominican neighborhood residents who had reduced the money they were able to send back to their country. "I would like to wait longer to make sure there is a trend in reduced unemployment, and not just some people who got lucky with jobs."

Ironically, the rent that is hurting small shops is one of the reasons several professionals and mid-size firms may be moving to the neighborhoods.

"This is one of the last neighborhoods on this island where you get value for money as a small business, where you have subway and bus connectivity and all the amenities you need to run a business professionally, and at affordable costs," said Ramon Veras, co-owner of Facility Value, a city-wide cleaning service that runs out of an office on the sixth floor of the Inwood Center. "This island isn't growing any bigger."

Apart from the affordable rent and facilities, the neighborhood is also "great for hiring employees," Veras, a Bronx resident, said. "People here are from different countries, and have come to a new country where, despite language barriers, they want to prove themselves. They want to be recognized."

For many professionals though, opening their business in Washington Heights and Inwood was about going where they concluded the demand for their services was.

There on 'a hunch'

Filmmakers Alexander Klymko and Edwin Figueroa moved into one of the newly opened office spaces at the Inwood Center early November. They are launching their latest business initiative, an end-to-end film production firm called ‘The Moving Picture Factory' that will offer services from pre-production to post-production.

"Many of our friends asked why we were making this neighborhood our base, instead of downtown, where most film production firms and vendors are," said Figueroa. "I said—that's precisely why. There's hardly anyone here, and people who want those services need to travel downtown or to Brooklyn. There's a market here, and we want to be part of it."

A floor above, speech therapist Katerina Melitsopoulou took a chance and it paid off. When she wanted to start her clinic, she had the whole of New York City to pick as her location. But she wanted to use her knowledge of Spanish apart from English, and realized she had a virtually captive market in Washington Heights and Inwood—a market that hardly anyone was catering to. The nearest Spanish-conversant speech therapist before Melitsopoulou opened her clinic was at Columbus Circle.

Melitsopoulou started on her own in a one-room clinic in Inwood in late 2008. But in a year, she had to expand to two rooms because she needed more space for therapists to hold sessions with children. In 2008, she worked alone. But due to an ever-increasing demand for her services from parents, she last year hired seven part-time speech therapists to help her. She plans to hire even more part-time speech therapists this year to help her meet the demand. Most of her clients are children from public schools, referred by the Department of Education, which also pays for their therapy.

"I came on a bit of a hunch," Melitsopoulou said. "I said to myself, if I cover a need, I'll stay. If not, I'll move. Apparently I did cover a need."

So did Bodner, at the Liberty Tax Service franchise. Her challenge was to explain to the local population that even immigrants without documentation could file tax returns using an Individual Tax Identification Number without risking deportation by the Immigration and Customs Enforcement, since the law bars the Internal Revenue Service from sharing details of those who file returns with any other government agency. She hired local employees on her team, which helped her earn the community's confidence, she said. Once she and her team managed to win over a few locals with her arguments, word of mouth, she said, worked as their best advertisement.

The boom will continue while the neighborhood retains the economic advantages it offers to businesses and professionals looking for offices, Veras argued.

"New businesses that want a 212 phone number will over the coming few years rush here, before this neighborhood also becomes unaffordable," he said, briefly looking outside his window towards the subway tracks that connect the neighborhood to the rest of the city, before turning and smiling.

"I think the best for this neighborhood is yet to come."