I have a separate building on my property that I use for art. I don't want to take the home office deduction as don't want capital gains liability later. Is there any issue with deducting the utilities though?

Yes, you may deduct any expenses that relate to your business on Schedule C. 

This includes utilities for a separate work space. You are not required to take the Home Office Deduction in order to claim the expenses. 

You would need to allocate shared expenses, however. For example, if your utility bill covers the entire property, you would need to allocate that expense using any reasonable method. Most taxpayers use square footage. You might consider installing a separate utility meter for the workspace if the rate of consumption is much higher than the square footage would imply (ie: using a kiln, welder, or other large equipment).

Thank you! The utilities are on a separate meter.