In an ArtNews report from September, Daniel Cassady asks if art market writers are getting it wrong, arguing that the market is not as distressed as reported ad nauseam. He quotes Kenny Schachter, who suggests that the data is skewed; some noteworthy gallery closures in New York City do not represent a market that is doing just fine. Cassady points out that all these articles of doom and gloom may be feeding the downturn.
The lead market writers for Artnet News and ArtNews have been thorough and accurate, but they are looking at only a restricted subset of data, as I will explain. In fact, the market is far worse.
I started collecting art in my early 20s in medical school, buying by working weekend jobs and taking out loans. There were no art databases, nothing to check auction history. I overpaid substantially for our first contemporary purchase — Kenneth Noland’s “Shift” (1966). The third purchase my wife, Livia, and I made was Ellsworth Kelly’s “Chatham VIII” (1971), which required a three-year bank loan. How was I to understand the reasoning behind its price when we were the only buyers of the 14 new Chatham works? How did galleries determine prices? I set out to learn this and the intricacies of auctions: hidden reserves, chandelier bids, guarantees, authenticity, and iffy condition reports.
Livia and I were offered Donald Judd’s first stacks, standing at 10 feet (~3 meters) high. The issue was price — swinging $12,000 while living in a med school dorm; a new artist at the time with a price equivalent to over $250,000 today.
The ’70s saw a lethargic market and in 1981, as though a spark was lit, the art market began a long, steep ascent. It became international with 10 times as many collectors by the end of the decade. Galleries proliferated, the East Village was a vibrant scene, and Soho was the epicenter. Prices soared. When a young artist was included in the Whitney Biennial, prices might have tripled. Works in 1989 were selling for $100,000 to $200,000 by artists with thin resumes. It was a seller’s market.
Ellsworth Kelly, “Chatham VIII” (1971), oil on canvas (image courtesy Marc Straus Gallery)
Then, in 1990, the market completely crashed. It started with the withdrawal of all Japanese collectors at once, and the tinder was Japan’s financial crisis, paired with a vastly overpriced market and speculation. At Sotheby’s in 1991, there was not a single bid on the 13 lots that came up before the one I hoped to get at a bargain. By 1995, the market slowly became energized and rose episodically until 2008, when Lehman Brothers collapsed and everything stopped for about nine months, with many job losses in galleries and then a market reset about 40% lower. The market progressively rose until May 2022, when the malaise set in and gradually intensified.
What are the causes of this current decline?
- Irrational speculation pre- and post-COVID as never before, as evidenced by Asian collectors buying untested young American works that, in some cases, went from $30,000 to over $1 million in just three years.
- The Chinese real estate crisis, with a devaluation of perhaps $60 trillion and a tightening of moving money offshore.
- Post-COVID money spent on works never seen, listening to poor advice and algorithms that don’t have heartbeats nor an eye for quality.
- Primary market prices were often too high to sustain such a downturn. It was the equivalent of an all-time high price/earnings ratio.
- Auction houses soon struggled and adapted to offer easier online buying and made many more online sales.
- Quality consignments are increasingly more difficult to realize in a down market. Auction houses strive for high throughput rates, selling over 90% of works offered. To achieve that, they have forced estimates often below half the primary market, promising that by starting at a “bargain,” there would be more bidding and better results. But in fact, for most recent auctions, average prices were nearer low estimates — meaning far below retail. And that has fueled distrust in primary prices.
- Auction houses have increasingly made sales in which many of the works have no reserves. Take the important Mallin Collection at Sotheby’s — toward the final iterations of sales in 2024 and 2025, scores of works could be had at $1. And many did sell for less than the cost of the paint. The optics of such sales are devastating.
- Auctions charge around 27% commissions, which in a down market make consignors far more resistant.
- When auction prices of newer high-flyers started collapsing, the bottom fell out. Some artists’ prices dropped from $1.8 million to $30,000. Almost no one was going to chase the newest high-flyer. Those who bought into the speculation became jaded and most withdrew.
- No longer were galleries protecting secondary sales. Auction guarantees and chandelier bids camouflaged the weakness.
- Artsy has a huge presence now. It’s a marketplace with tens of thousands of works for sale. It is part of the democratization of art sales, and also at this moment plays a role in the downturn. For many artists, there are simply too many works being offered for sale. It diminishes many important conversations between the gallery and buyer.
- Art fairs — there are far too many and, yes, they are very expensive. Fewer American collectors went to Basel this past June than in previous years.
One very prominent collector who has averaged buying some 300 works a year recently told me that she is going to wait this out; prices had become senseless.
This declining market is worsened by a doubling and tripling of art shipping costs and higher rents, especially in NYC. Spaces on Grand Street, where my gallery has our flagship location, can cost as much as $200 per square foot. The worst of this is not the closure of Blum in July. It is some 60 mostly younger galleries that went under in the past three and a half years that almost no one has written about. Just look at the gallery maps of the Lower East Side in 2020 compared to now.
What art market analysts are writing is factually true, but the data are not fully representative. Gallery sales are almost always private, and only a small percentage truthfully reveal their sales and profits. Where it’s public, as with the eminent Sadie Coles gallery in London, we see examples of over 50% sales drops. Average gallery sales are reported to be down 8 or 10%. That would hardly have caused closures. It is far, far worse.
Reports at art fairs trumpet the triumphs. Auction data tell us that the total sales of contemporary art are down 15% and then 27%. Sales of the highest-priced works are said to be down far more. A half-year report from September says the average price of a work at auction is down 7%. But these reports hardly address the selection of works and quality. Auction houses focus on what they think will sell. They turn down many pieces, and in a slow market, they are offered less good work. Auctions are taking many fewer sculptures because more buying is online, and appreciating a 3D work through a screen is challenging. Lately, there is much more abstraction and much less Black figuration. They try to find the trends, and as a result, so many artists with reasonable auction prices four years ago are not accepted for auction now in the belief that they won’t sell. Thus, we aren’t seeing much of the large market declines because works are rejected. Furthermore, to have an artwork accepted by a lead auction house for the May or November New York day sales, they want to realize a minimum, often $25,000.
Marie Watt, “Skywalker/Skyscraper (Portrait)” (202), Livia Straus family blankets, I-beam, cedar (image courtesy Marc Straus)
One well-known barometer of the art market is the Mei Moses Art Index acquired by Sotheby’s, quoted by many as authoritative. It is a database of over 30,000 artworks that have sold at least twice at auction, establishing a time interval and two prices. It is tremendously valuable, but consider that only a small percentage of artworks come to auction, a minuscule percentage come up twice, and those that do are often more desirable.
We love to blame the auction houses. They are businesses driven by profit. They don’t represent artists and need not have fealty to them. They cut the best deals that they can for themselves. When markets soar, obtaining consignments of good works at acceptable reserves becomes easier. Who wants to sell at a bad time and when pushed to low reserves?
The gallery business is the worst model for a business that I have ever known. I ran both small and very large medical practices; not easy in our complicated insurance environment but doable. A gallery, on the other hand, is a seasonal business. They may sell little or nothing at expensive fairs. Rent is up. Foot traffic is down. A downturn such as this one is truly difficult for this industry. It has only one product: Art.
As with every downturn, there will be a correction, and this one is imminent. A sustained slowdown like this engenders necessary changes. It is a market truism that galleries can never lower prices. But they can, carefully and reasonably. It’s happening. After all, auction sales go to the highest bidder.
The speculators are nearly gone. Galleries are promoting lower-priced works, readjusting some prices. Artists are more attentive to the new market realities. A leveling off is occurring. The disposition of estates cannot easily legally be put off, and sooner or later, several major estates will come to auction.
In the wake of this week’s auctions, with capacity crowds again at night sales, there was a great sense of relief and some optimism. The Pauline Karpidas sale did very well earlier this fall. The Robert F. and Patricia G. Ross Weis, Leonard Lauder, and Cindy and Jay Pritzker Collections just sold and boldly make the case that quality rules. A-plus works often broke records, and the Lauder sale buoyed the Sotheby’s sale that followed. Hundreds of works offered of lesser quality either didn’t sell or sold for low prices. For the most part, there was little recovery of prices for artists whose market had been battered. But it was a truly good week.
As curator Alex Feim noted recently, a whole bunch of new galleries are opening. The Armory Show this September was packed with people. One can feel hesitancy but also renewed enthusiasm. The newer collectors are learning the value of looking in person, of feeling the thrill of seeing an artwork they fall in love with, of the back-and-forth repartee with gallerists. More seasoned collectors are coming back in.
I just bought a fabulous sculpture from a gallery that for years had a hard rule that it didn’t offer discounts. Apparently, that changed. I purchased a painting by a newish artist from another gallery offering it at a very reasonable price. Signs of a healthier market.
Tagged: Art Market, Featured
Marc J. Straus
Marc J. Straus is a poet, writer, doctor, scientist, art collector, and gallerist. He is the author of numerous scientific papers and articles on contemporary art, has published four poetry collections.... More by Marc J. Straus
