The Great Central Gallery & Studios is not an easy place to find. After 15 minutes of searching in vain for an entrance – walking up and down Sussex Street's desolation row of graffiti-tagged railway arches, noisy body-building gyms and knackered old factories – I began to doubt its existence.

Could it be that the Great Central is one big conceptual wheeze? A comment, perhaps, on the council's shelving of plans for a £2.5 million replacement for the City Gallery in New Walk?

If you wanted an address for an imaginary, non-gallery to satirise Leicester's cash impoverished cultural aspirations, then it would surely be here: a grotty back street, untouched by regeneration, between St George's Retail Park and Big John's fast food joint.

My theory is dashed by the appearance of a man waving from the first floor landing of a red fire escape. He's way too thin to be a gym bunny. The full beard, perpendicular hair and pallid complexion offer convincing evidence of someone with a more artistic disposition.

He must be Eric Rosoman, founder of the Great Central with fellow co-director Steve Lynch.

"You must be Eric," I say.

"Yes," he replies, waving me up the stairs for a guided tour.

We step into an ultra-bright white room, the gallery's exhibition space – completely bare today, apart from a small flat-screen TV playing a video of something on a loop.

I can't make out what's being said on the video thanks to the bass-heavy R'n'B bleeding through the walls from Spike's Gym next door.

"It gets quite noisy sometimes, particularly when they drop the weights," says Eric, 35. "You can hear the music from the kick-boxing gym too, but they have slightly better taste."

Eric ushers me through a door to a room containing a drum kit and the piled-high paraphernalia of a working artists' studio. Six artists do their stuff in here, says Eric, including himself.

The Great Central has been open for two years, but our archives suggest it's not had a single mention in the Mercury.

Why is that? I wonder.

Eric, softly spoken almost to the point of being inaudible, shrugs and mumbles something about sending us e-mails on forthcoming shows. Perhaps no-one picked them up? he offers.

Fair enough. Eric is a part-time exhibition co-ordinator for the City Gallery currently housed in the New Walk Museum, and he's got his own work to worry about, so there's probably precious little time left in the day to chase up the local newspaper for a bit of coverage.

It's a fairly modest set-up Eric and Steve have here, but this little gallery and studio space, incongruously situated in an unlovely corner of Leicester, is starting to make the right people sit up and take notice.

Recent curated show Thirty Five Milliseconds (named after the difference between how long the human brain takes to recognise a real human face compared to an image of a face) featured works by Susan Collis and Elizabeth McAlpine – both of whom have exhibited all over the world – alongside those of emerging talents such as Joe Walsh and Leicester's Penny Davis.

Thirty Five Milliseconds was well received and it managed to do a notoriously difficult thing – it got figures from London and Birmingham's contemporary art scenes into the city.

Steve and Eric started the gallery with a £5,000 Arts Council Grant, £500 from the city council and £1,000 from Creative Leicestershire – an organisation that supports small arts, design and media businesses in the city.

That cash paid for a small-scale renovation of the rented venue and an overhaul of its electrics. Now, thanks to free help from volunteers and hiring the venue out as an exhibition space for shows, it is just about self-financing.

The aim now is to win Arts Council funding to subsidise more curated shows.

Curated shows, generally organised around a theme, carry more kudos for an artist than putting on your own event because they are by invitation only. They also give less well known names a chance to share the spotlight with those who have already established their reputations.

Eric, quite reasonably given his day job, chooses not to comment on the aborted New Walk gallery project.

What he will say is that Leicester is not starved of talent. The thing it lacks is the infrastructure to support and grow the careers of artists.

There is a migration of people to Birmingham and Nottingham at the moment, he explains, because there are not enough studio spaces and places to exhibit. Cities with thriving arts scenes tend to have a pyramid of different venues. At its top is the big showpiece gallery. Below that are two or three second-tier venues. Under those are a network of less formal exhibition spaces for those making their way in the contemporary arts.

It's not all doom and gloom for art-lovers.

The Leicester People's Photographic Library in the old Belvoir Street library has just opened its doors. There are also plans for a new gallery in Queen Street. It will be run by a visual arts collective made up of ex-De Montfort University students called Cusp, and Vanilla Galleries – a group of Loughborough University graduates.

The aim of the Great Central, along with the Queen Street project, is to grow Leicester's art scene from the ground up.

"Artists can't really develop if they don't have the gallery space," says Eric. "We kind of see the Great Central as being one step to bringing in more exhibitions in and around the city."

Keeping the Great Central going on such a shoestring budget has been a challenge, Eric admits, but it's been a rewarding one.

"I'm glad we started this," he says. " It's about trying to keep people with talent in Leicester, which isn't easy, because the opportunities are quite small at the moment.

"Artists will move to London or the other big cities. That will always happen. We just want it to be more realistic to get a start and stay in Leicester for the first few years of your career."

Why is that important? A curmudgeon might argue that the city is not in a financial position to support challenging contemporary art when so many essential services are being squeezed.

It's important, believes Eric, because the internet, graphic design and new media industries that Leicester wants to attract depend on a thriving arts scene. Creative people looking to locate here want galleries and theatres to go to – and they want to be inspired by artists doing interesting things. Art and commerce go hand in hand.

"I've heard the arguments about funding the arts or hospitals," he says. "Art exhibitions and the theatre are what we do when we're not in hospital. They help keep us healthy and interested in life."

For more information on the Great Central and forthcoming exhibitions visit:

www.thegreatcentral.org