May 2001

Eight leading market figures on what the next recession will mean for the art world

In 2001 they predicted that some areas such as the Old Master market will remain stable but that trendy art would lose its zip

We pull out our magic eight-ball Photo via Flickr

“The strong dollar is affecting sales to Europe”

Jane Kallir, Gallery St Etienne, European Modern Art

We are seeing a collapse of the bubble stock market, but this is not in and of itself harmful. Bubbles are more frightening than corrections, which are ultimately healthy and necessary. There has been an analogous bubble in the art market which also requires correcting; there was and is a huge gap in price between the top of the market and everything else. In the 1980s everything went up; this time the market has been much more selective. The art market, like real estate, tends to respond relatively slowly to economic changes. People with money will always have money, but there is a psychological factor involved. Even if people have only lost money on paper, at the moment they don't feel so rich. Personally, my business is affected less by the stock market than by the high dollar, which makes sales to Europeans more difficult. One area in which we are doing well is Outsider Art. People seem to see that field as offering good value for the money. It is possible that cutting-edge art will suffer, but a recession might actually be good for lower priced contemporary work. People will still want to buy art, but not at the top end; young artists could end up benefitting, at the expense of people like Damien Hirst. At any rate, we all need more time to figure out what is really going on.


“There will be a natural correction to the flood of galleries, art, fairs”

Lea Freid, Partner in Lombard-Freid Fine Arts, Contemporary

We noticed a problem after the Armory show [late February]. People who had reserved things panicked a bit after the stock markets started falling. However, they were mainly new clients; our established clients did not react like this. We don't sell the very emerging artists, but I think their market would be affected because of the crash. I think the consultancy business could also be hit by the recession, as well as the hundreds of new galleries that have opened in the last three to four years in Manhattan, many of which did not really have specific programmes.

I think that what is happening now is a natural correction because there is just so much out there–we are flooded with new galleries, art, fairs (I did three in February alone). Photography has also seen a boom and I think that could be affected because people perhaps will not want to buy multiples so much.

I think people are stepping back; they are shifting to being more careful about the galleries and think it is safer to buy well known names. So I think the emerging artists' market will be hit. However, for me, after the the post-Armory dip, things are pretty well back to normal now.


“Collectors of Old Masters are more cautious, so the market is more stable”

David Tunick, Tunick Fine Art, Works on paper

A recession would slow the market, but not kill it, like last time around. The question is to what extent. In the late 80s the Japanese provided so much ebullience that the entire market was lifted to unrealistic heights. Recovery from the depths of the early 90s has taken the better part of ten years.

This time the foundations are far more solidly based. They have been built by serious collectors, market-savvy museums, and chastened, cautious dealers, all aided by databases like Artnet that provide the kind of price information upon which rational, logical buy-and-sell decisions can be made.

In other words, there is nothing like an 80s-like Japanese bubble to burst. Nonetheless, the entire economy would be affected by a recession, and some of that would inevitably influence art prices.

The areas of the art market which would be affected are probably contemporary and fringe areas such as collectibles. The Old Master segment of the market is less subject to the vagaries of the economy by the nature of the collectors. Like the art they collect, they tend to be more conservative in their stock market and other investments. You don't expect someone who focuses on Dutch 17th-century paintings or Dürer engravings, for example, to be involved heavily in the Nasdaq or penny stocks. Historically, the Old Master market has experienced none of the same sharp movements up or down, and I would not expect that to change if we do go into recession (which is not at all certain).

As for seeing signs of a recession, we have one couple, clients of ours, who I would say are worth, conservatively, about $150m to $200m. At the moment they are hesitating over a $400,000 purchase because of stock market jitters

As for seeing signs of a recession, we have one couple, clients of ours, who I would say are worth, conservatively, about $150m to $200m. At the moment they are hesitating over a $400,000 purchase because of stock market jitters.

In the Maastricht fair, we had a few people, Europeans in particular, who came to our stand, admired objects on display, and said they would have bought them had it not been for stock market uncertainty. Nonetheless, we sold very well, way ahead of the figures we had reached the year before, and we are experiencing the same results in the gallery.


“The art market is essentially different from the world economy”

Marc Glimcher, President, PaceWildenstein, Modern art

The funny thing about the art world is that, in the beginning of a recession, the art business is almost always very good, sometimes even for a year, and that's probably because, on the one hand, people are considering putting money into art from a financial standpoint, and then there are others who are sitting on the fence deciding whether or not to sell a work of art. So, sometimes, the art dealers seem to have a different opinion of the economy than anyone else.

When the stock market is having a nervous breakdown, this happens because people pull their money out of the stock market. They have to do something with that money, and, traditionally, some of those people put that money into art. So that's how the contrary trend of the art market gets started.

Pace has not really felt the recession yet, but I don't think any of us will be surprised if we do.

Art is the typical "Geffen good", and a "Geffen good" is one where demand goes up as the price goes up, and demand goes down as the price goes down, which is the opposite of the way everything works in the whole world

The reason the art market is so hard to comprehend is that it doesn't follow the traditional rules of the marketplace, but follows more closely the economic concept of the "Geffen good", as in product. Art is the typical "Geffen good", and a "Geffen good" is one where demand goes up as the price goes up, and demand goes down as the price goes down, which is the opposite of the way everything works in the whole world. It's a contradiction of the central rule of economics, so that makes for a pretty erratic and unpredictable market.

More specifically, it makes for a market that can be very unforgiving for art in which history has lost interest. There's no safety net: when an artist's work becomes less and less expensive, people don't say, "It's really cheap; we're going to go in and buy it!"

Art isn't the only thing that functions this way, but it is the most significant.


“This is a very different world from before the last recession”

Jack Shainman, Jack Shainman Gallery, Contemporary

Last time, the Gulf War contributed to the recession. It seemed to be the catalyst for the end of boom times.

This is a very different world from before the last recession. Back then, at the high end, prices were vastly over-inflated. Also, there was a lot of speculation, and people were borrowing to buy. If there was a good side to the last recession, it was this: after 1991-92, collectors started looking at new things, at younger and emerging artists, in reaction.

This time around, I feel confident about where my gallery is. The way we will deal with the coming crisis, assuming there is one, is to keep the level of quality the highest it can be; keep doing what we do.

The 2000/2001 season has been amazing; we are showing both younger and mid-career artists now and there has been a great deal of demand. We have been very fortunate. We also deal in the secon

dary market, which has been very strong for us recently, with lots of deals still happening at the high end, a not so vulnerable level.


“Thirty percent of the Chelsea galleries will close as their leases fall in”

Jack Tilton, Jack Tilton/Anna Kustera Gallery, Contemporary

If you are a businessperson as well as a dealer, which is what I am, you have to look at this recession. I am being patient, looking at the real estate market for places to which to move. For me, Chelsea is the least interesting place; 30% of those galleries will go out of business. Hells Kitchen, Harlem, Queens, Brooklyn: the next gallery district could be anywhere. If you are with the masses, you’ve got to stare at Chelsea. Everyone knows the market will come down. When you are dealing with young artists, the numbers have got to work. The big boys will survive. I think everything is on hold right now. In the next year and a half, you will see a lot of change. Most Chelsea galleries are on five-year leases, so they have two more years before they come up. [Now we are heading] into the recession, they probably won’t be able to stay in their spaces. Galleries such as Sonnabend who own their spaces will survive. Metro Pictures will have no worries; they will ride it out. Guys that came in later will suffer. After the next five years, a new zone for galleries will probably appear. Harlem went up way too fast; not an option now. Probably Brooklyn or Queens, but it won’t happen for five years.

Next year will be very interesting. The big guys will steal the small guys’ artists. The fittest will survive, if you want to look at it in a Darwinian fashion

Next year will be very interesting. The big guys will steal the small guys’ artists. The fittest will survive, if you want to look at it in a Darwinian fashion.


“No change so far”

Robert Mnuchin, Chairman, C & M Arts, Modern and Contemporary

A recession will temper enthusiasm, but not significantly change it. If there is such a thing as trendy art, it will lose its zip.

Our business in the last three months has not been significantly different since the beginning of the year.


“This pace has to slow down”

Philippe Ségalot , International head of contemporary art, Christie’s

We experienced an unprecedented boom over the past four or five years, with an incredible rise in prices, and obviously this pace cannot continue. For example, photography has multiplied by ten in that period, I don’t see this going on. There will be no dramatic change but we are probably going to experience a slow-down and stabilisation of the market.

I think the blue-chip will not be affected, but B-quality works could be hit.

It is difficult to tell whether we are seeing signs yet. I don’t think the bursting of the bubble will affect us as many of our buyers are European and not entrepreneurs. A typical profile of one of our clients would be someone who has been collecting for 20 years and is 50-60 years old.

Originally appeared in The Art Newspaper with the headline "The R word: is it or isn't it around the corner?"