Selling art

J.J. Charlesworth examines a recent report on the uncertain prospects of the art market

By J.J. Charlesworth

“Compared with other industries, the art market is famously difficult to quantify… But as the industry grows larger and more globalized, it becomes ever-more important for everyone involved to add solid data into our thinking, combining it with instinct and anecdotes in forming our views on the artworld and its potential futures.” So writes Art Basel’s director Marc Spiegler in his introduction to The Art Market 2017 (free to download here), an exhaustive 148-page report commissioned by UBS and Art Basel from consultant Clare McAndrew, an economist has over the last decade made a niche for herself and her consultancy Arts Economics, putting together the complex and often disparate sources of data that accompany global commerce for art (in particular for the European TEFAF art fair, for whom McAndrew produced an international art-market report between 2008 and 2015).

The Art Market 2017,  published in March, has quite a bit of solid data, and goes some way to figuring out where the art market – which boomed with such enthusiasm in the 2000s then slumped over the 2010s – might be headed in the 2020s. The world of art fairs and the art market can be full of hype, but McAndrew’s report isn’t a boosterish celebration of how fantastic the art market is, and how everyone with any money should pile in as soon as possible, and it’s interesting that the biggest art fair in the world should be backing the publication of research that doesn’t make any bones about how the global art-market has declined since 2014: from a peak in total sales (at auction and through primary and secondary dealing) of $68,2bn, slumping over two years to $56.6bn last year. That’s little more than the $54bn of total sales in 2006, before the market fell off a cliff in 2009 following the financial crash. Since then, growth has slowed and then reversed.

Art Basel doesn’t have too much to complain about, of course: although the report is coy when it comes to naming names, it estimates that art-fair sales of art have grown from $8.5 billion in 2010 to $13.5 billion in 2016, which, against the fact that total sales have fallen back to where they were in 2010, means art fairs aren’t doing badly. And as the biggest fish in the pond, and with its parent company MCH busy buying up smaller art fairs around the globe as the lower end of the art fair market struggles, Art Basel remains a major beneficiary of the internationalization of the art market over the last decade. The shift to art fairs is one of a number of trends The Art Market 2017 highlights, and although some of these are already widely acknowledged, the report puts numbers on these, and manages to feel out some more obscure developments.

it’s interesting that the biggest art fair in the world should be backing the publication of research that doesn’t make any bones about how the global art-market has declined

When it comes to the big falls in sales since 2014, the main factor has been the contraction of the auction market, as auction sales dived in 2016, from $29.9bn in 2015 to $22.1bn. Meanwhile, in the world of art dealers themselves, the story seems to be of a polarization of the market, with the high-turnover, big-ticket-sale galleries doing increasingly well while the lower and middle end of the commercial gallery world struggles. Although the report admits the difficulty of getting hard data out of private dealers, the surveys the report’s team conducted indicate the sales made by smaller dealers (those with less that $500k turnover) fell by 7%, with sales of those turning over less that $250k fell hardest, by 11%. Those with turnover between $500,000 and $1m also experienced a fall, while those between $1m and $10m saw sales grow by 7%. The biggest winners were those with turnover in excess of $10 million, with sales growing 2%. Yet within this was a big split – between those with turnover between $10 million and $50 million experiencing a 10% annual decline, in contrast to those with turnover of over $50 million, who saw sales grow by 19% in 2016.

That polarization is a big problem for the art market, not least because it reinforces the tendency for the market to concentrate on the biggest names, controlled by a diminishing group of high-end galleries, which over time tend to secure the long-term reputation (and value) of a diminishing number of artists. It’s telling that the reports surveys cite dealers’ concerns over sourcing ‘high quality works’; it’s also worth noting that dealers working in the secondary sector – those in the business of re-selling works already sold since they were made – have reported significant increases in sales in 2016. Dealers reselling old works means dealers not selling new works, which can only mean a tendency to concentrate value in what’s circulating on the market, while shutting out new works and new artists.

That the secondary market is showing gains while the market for artworks polarizes should be seen as something of a warning sign, along with the survey findings that dealers are selling stock more slowly. Meanwhile, as ‘post-war and contemporary art’ grows up, sales in ‘modern’ and pre-1900 art – impressionists, old masters and so on – decline. Much in The Art Market 2017 signals that the global art market is starting to lock up. And, if it wasn’t for the meteoric ascendance of the Chinese art market over the last decade, the figures would look quite a bit worse.

Part of this polarising dynamic The Art Market 2017 attributes to growing wealth inequalities, devoting a whole section to an analysis of the much-obsessed-over ‘high net-worth individuals’, or HNWIs. At some points The Art Market 2017 starts sounding weirdly anti-capitalist, with splash-headlines declaring things like ‘The top 1% of wealth holders in 2016 owned just over half of the world’s total household wealth’. But while it notes the increasing wealth of the top 10% of the population, The Art Market 2017 sees the super-wealthy behaving more cautiously that ever before; as the report puts it, collectors ‘reduce their own risk through reliance on the established preferences of previous successful buyers’, but ‘these risk-reducing techniques tend to reinforce the “superstar phenomenon” in the art market whereby the works of the most famous artists are demanded the most and achieve by far the highest prices in the market.’

The issue that haunts The Art Market 2017 is the wobbly state of the global economy after the 2008 financial crash. It notes that the strong growth still evident in Asia is mitigated by the stagnation of growth in the developed economies of the West. The increase in HNWIs may be good for the top end of the global art market, but The Art Market 2017 frets continuously over its own version of the ‘squeezed middle’, arguing that ‘the concentration of values and spending in a narrow segment of the art … creates prices out of tune with fundamental values and the scope of middle and upper-middle class consumers, who are critical in giving depth to the market’.

‘The success of a broader range of artists and businesses supported by a wider collector base would be more beneficial for long-term development’, the report concludes; how to achieve this is not an easy task, however, and The Art Market 2017 ends still groping for answers to this problem.

Understanding why collectors are keen to park ever-increasing sums in artworks has a lot to do with the nature of a period in which the world is awash with cash (a lot of it ending up in the pockets of the top 10%) yet where there’s little growth across the advanced economies. The truth is, there’s simply a lot more wealth sitting around doing nothing; it’s what sustains much of the extraordinary growth of the art market in the twenty-first century, as well as the cautionary approach of collectors in putting their money into artworks which will hold that value safe, at a time when the future seems more uncertain than ever.

Published online 28 June 2017