What’s in store for the market?
The growing numbers of the super-rich should keep the auction houses happy in 2013, but there are tougher times ahead for some
By Georgina Adam. Comment, Issue 242, January 2013
Published online: 10 January 2013
In January 2012, the outlook for the art market was bleak, with turmoil in the eurozone and recession in many of the world’s major economies. Nothing changed—at the macro level, at least—throughout the year, so art dealers finished 2012 surprised that, for many, trade was not as bad as expected. If anything, the results at the top end of the market have never been better; more than $1bn was spent on art during last November’s sales in New York, with Christie’s racking up an all-time record for a contemporary art sale, at $412m. But will we witness similar success next year?
The 1% of the 1%
I believe the top end of the art market will continue to perform strongly, particularly in the contemporary, Impressionist and Modern art sectors. There are a number of reasons for this. First, the building of so many museums across the world will sustain buying. Although the reported “1,000 museums” in China may prove an exaggeration, many are under construction and are being stocked with works of art. Elsewhere, the Abu Dhabi Guggenheim is back on track (or at least the authorities in the emirate are anxious to tell us that this is the case). The Middle East, with its huge resources, wants to establish itself as a cultural hub on a par with other, more established centres. And billionaires’ “vanity museums”—sometimes an unfair criticism—need to buy top works of art as well.
In this context, a recent book by Chrystia Freeland, Plutocrats: the Rise of the New Global Super-Rich and the Fall of Everyone Else, 2012 (Penguin Press), offers a fascinating analysis of the new global super-rich. She sees today’s incredible wealth as the result of two transformations: technological revolution and globalisation in the West, coupled with an Industrial Revolution-sized burst of growth in much of the rest of the world, leading to the convergence of two “gilded ages”.
The wealthiest 0.1% have accumulated dizzying amounts of money. The Mexican telecoms tycoon Carlos Slim is worth a mind-boggling $69bn (read that again: $69bn. It’s not a mistake). The Russian businessman Roman Abramovich spent around $1bn on his yacht Eclipse in 2010, and he has four other such floating palaces. The Indian businessman Mukesh Ambani (worth $23.5bn, according to Forbes) has a 27-floor home in Mumbai that has been valued at more than $1bn. So what are a few million dollars spent on art, beside these fortunes?
Most of today’s super-rich do not come from art-collecting backgrounds, so they have not inherited collections; Forbes says that 840 of the 1,226 people in its 2012 billionaire rankings are self-made. When someone reaches this level of wealth, it is very probable that they will start buying art to hang on the walls of the multiple homes they own, if not for their private museum.
Art is among the ultimate purchases, after houses, cars, yachts and private islands. It gives its owner bragging rights, as well as making him or her (rightly or wrongly) feel that it is a secure investment. You can always buy another yacht. You will find it hard to buy another prime Cézanne.
So although there has been a rising chorus of negative comment about the huge prices achieved at the top end of the market, there is no reason to predict a slump any time soon. And as other investments become less attractive—yields on bonds are minimal, and equities are volatile—it will remain tempting to put at least some of a portfolio into something solid.
Can the same be said of the middle and lower ends of the market? Here, the economic climate will have an impact. If the outlook becomes sunnier, then wallets may come out too, but if the various threatened tax hikes and government spending cuts hit incomes across Europe and the US, then these parts of the market will suffer too.
Art dealers are fretting, and rightly so, about the growing encroachment of auction houses on their turf. Under pressure because of competition to get the best consignments, the auction houses have been successfully growing their private treaty sales and private selling exhibitions, which give them more flexibility. Christie’s says that the number of clients buying through private treaty has doubled in three years, leading to the interesting question: is that from, say, one to two, or from 100 to 200? Of course, the company won’t say, but the trade suspects that the Middle East (read: Qatar) accounts for a big chunk of this revenue.
For dealers, particularly in the secondary market, competition from the auction houses will remain a major worry, and one that they are ill-equipped to resist.
New art fairs mushroomed throughout the world last year; Frieze added two major new events, while smaller operators plugged gaps in other countries. But dealers are beginning to kick against the art-fair treadmill. Those in the middle market are finding business tough, and the fair calendar is now jam-packed—and too concentrated in spring and autumn. Starting in May this year, there is a run of events—the main New York sales, followed by Frieze New York, Art Basel, Art Basel Hong Kong and the Venice Biennale (a sort of art fair as well, and certainly a must-visit event)—all taking place in less than five weeks. I predict that dealers will cut back heavily on the number of fairs they attend, and that Art Basel Hong Kong will announce a change of dates after this year’s edition (23-26 May).
What, meanwhile, will happen to the Merchandise Mart Property Inc fairs, which, according to the New York Observer, have indeed—as The Art Newspaper predicted—been sold to Louise Blouin, the owner of Artinfo? The leading fair in the group is the Armory Show (the others are Art Platform Los Angeles and Volta), which now has heightened competition in its backyard after the birth of Frieze New York. The arrival of a new owner is always unsettling, and there are likely to be changes in these fairs’ management structures.
Following the money
It is a truism in the market that art follows the money. Last year, oil-rich Azerbaijan threw itself behind a campaign to gain a place on the art map. The country’s ruling family arranged meetings across Europe and in the US with leading figures in the art world to promote the country’s plans to build museums and produce new art events.
Christie’s was quick to recognise an opportunity and organised a shindig in Baku to show off some of the things the newly rich Azeris could buy. A travelling exhibition of Azeri artists, “Fly to Baku”, sponsored by the foundation of the president’s wife, will go on to Moscow and Rome this year after stops in London, Paris and Berlin.
Sotheby’s, meanwhile, is holding a selling show of art from Armenia, Georgia, Azerbaijan and the “Stans”—Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan—in London in March. If you don’t know much about these regions, you will before 2013 is out.
Faithful no more?
Last year saw a list of big-name artists demolish the traditional rules of artist representation by holding shows at rival galleries: Peter Doig at Michael Werner (under the nose of his long-time dealer Victoria Miro), Gagosian artist Jeff Koons at David Zwirner, Hauser & Wirth’s Thomas Houseago at Gagosian. This trend is likely to continue, as more artists turn to agents to look after their business interests.
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