Can the art market defy predictions of a downturn?

By Lindsay Pollock | From Frieze daily edition, 15 Oct 08
Published online 15 Oct 08

A crystal ball? No, a work by Petroc Sesti at Paul Kasmin (E14), but many wish it could tell the future

Under the sprawling white tent in Regent’s Park, amid yellowing leaves and calamitous financial markets, expectations on the eve of opening at the sixth Frieze Art fair ranged from concerned to cautiously optimistic. “It’s not all gloom and doom,” says New York dealer David Zwirner (G14), standing in front of a moody Chris Ofili landscape, priced at $400,000.

Zwirner expects most Americans to stay at home, but says the strong euro and weak economy had already driven them away from Art Basel in June. He is counting on Europeans. “There is still plenty of business to go round,” he says.

As British house prices continue to fall and the US government injects $250bn dollars into banks, opening day predictions among the 150 exhibitors are tempered. “The first two hours of the fair may not be the ‘sell-out’ we are used to,” says Salzburg-based dealer Thaddaeus Ropac (B12). “Sales will be made, but may be slower. Waiting lists may get shorter, but they still exist.”

Other dealers are watching and wondering what the historic global stock market volatility of the past month will mean for them. Many say it is too soon to tell. “We are in the eye of the hurricane,” says Frieze newcomer Eliana Finkelstein, director of São Paulo’s Vermelho Gallery (F20). Others are apparently confident the art market will forge ahead, especially for well-priced, established names. “The primary market is going to carry on, as long as it’s not over-speculated,” says Londoner Simon Lee (H1). Gallerists who have shelled out thousands of pounds to participate in one of the world’s priciest art fairs have obvious reasons to appear optimistic. But US consumer confidence has crashed, and the general mood around Manhattan is grim.

“So much of this is psychological—it’s a fear of the unknown,” says dealer Jessie Washburne-Harris of Harris Lieberman, who is attending Frieze but not exhibiting. She says some US collectors are coming as therapy. “They don’t have business to do but it makes people feel better to get together. It’s a gathering of the tribe.”

British and European dealers tend to be more upbeat. “The US press is very apocalyptic but things are more measured here,” observes London dealer Maureen Paley (D5). “One is cautious, but you can’t lose optimism.”

In fact dealers say there are upsides even in a down market. While many have profited from an eight-year rise in contemporary art prices, the major auction houses Sotheby’s and Christie’s have achieved explosive growth, grabbing dealers’ market share with aggressive guarantees and the cultivating of global art trophy hunters from emerging markets. Now, as the market is poised to contract, dealers may benefit. For starters, auction houses have reduced their level of guarantees.

“The crisis is quite good for dealers as it means we are being offered high quality paintings which we can sell by private treaty,” says New York private dealer Nick Maclean. “If the market slides, people are afraid to put things out there into a free market where there’s a fear the money won’t be there to prop it up,” adds New York art advisor Todd Levin. “The last thing people want to do is to watch it flame out in a public fashion.”

Dealers say they also offer rather more privacy. “People don’t want to be known as auction sellers,” says New York dealer Marianne Boesky (F4).

Despite dealer optimism, observers of the art market see reason for worry, suggesting the swollen pool of art buyers is bound to thin as quickly as bankers’ bonuses. “Collecting is an exciting diversion for people who are enlarging their personas,” says William Goetzmann, director of the International Center for Finance at Yale’s School of Management and former director of the Denver Museum of Western Art “But when you have a crisis that forces them to spend more attention and focus on the business problems at hand, it’s a question whether they are going to maintain that level of excitement for works of art.”

With additional reporting by Georgina Adam, Melanie Gerlis and Katharine Albritton