The week before Art Dubai opened, Art Basel and UBS launched the second edition of the Global Art Market Report. This is widely regarded as the most thorough and most accurate analysis of the art market, since it’s written by Clare McAndrew, the top economist specialising in the field.
So we can approach the numbers with some confidence. The headlines: after two years of declining sales, the global art market turned a corner in 2017 and grew by 12 percent to reach an estimated $63.7 billion. The United States retained its position as the largest single market and China just about overtook the United Kingdom to take second place (those three markets make up over 80 per cent of total sales in 2017, up slightly on the year before).
[perfectpullquote align=”left” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The art market turned a corner in 2017 and grew by 12 percent to reach an estimated $63.7 billion …[/perfectpullquote]
Dealers still account for the majority of those sales, an estimated $33.7 billion that represents 53 percent share of the total market, but it’s the other pipeline – auctions – that seems to be growing faster. Dealer sales were up 4 percent year-on-year, auction sales jumped 27 percent.
As ever, though, the picture is skewed. “Much of the uplift in sales in the auction and dealer sectors was at the top end of the market,” says the report. Away from the premium price segment, overall market performance was mixed. And the total number of sales didn’t grow as fast as values, an increase of 8 percent in numbers of transactions against that 12 percent gain in total sales.
So are prices for individual sales rising? Not exactly; remember the $450 million paid for Leonardo’s Salvator Mundi? That was more than four times the price of any other painting ever sold at auction. Or Jean-Michel’s Basquiat (Untitled, 1982), which sold for $110 million? Or the set of Twelve Landscape Screens by Qi Baishi (above), which sold for $141 million – both the highest price ever paid for a work of Chinese art at auction and the highest price achieved at auction for a single lot in China?
The total value of works auctioned for over $10 million more than doubled in 2017 – up by 125 percent – and those record-breaking auction prices for big names have obviously distorted the picture. By contrast, auction sales of works that made $1m or less are declining. So there’s no evidence that entry-level or mid-career artists are getting richer quicker (or at all).
[perfectpullquote align=”left” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Dealers with sales below $500,000 saw an average decline of 4 percent in their revenues …[/perfectpullquote]
Dealers aren’t too unhappy, though. 59 percent of respondents to the annual dealer survey conducted for this study by McAndrew’s consultancy Arts Economics reported positive year-on-year growth, 13 percent said their sales were about the same, and 28 percent noted a decline in sales. Again, it’s the big boys who are benefitting: those with revenues above $50 million had the significant increases in sales – up by 10 percent. At the other end of the scale, dealers with sales below $500,000 saw an average decline of 4 percent in their revenues. Maybe that’s reflected in the ratio of gallery openings to closures, which was 0.9:1 in 2017 – in other words, there were more galleries closing down than opening. (Back in 2007, the ratio was over 5:1 – five times as many galleries opened than closed.)
Online sales continue to grow, albeit from a small base. The online art market reached a new high of $5.4 billion in 2017, up 10 percent on the year before and now making up eight percent of the total value of art sales. As widely reported, online is bringing in new buyers – dealers reported that 45 percent of their online buyers were new to their businesses in 2017, auction houses said 40 percent of those buying online were new buyers.
And so to art fairs, the topic of the moment given the proximity (and record-breaking participation) of Art Dubai. Fairs continue to be a central part of the global art market, the source of sales estimated to reach $15.5 billion in 2017. That’s up by a decent 17 percent on 2016. Dealers reported that they made just under half of their sales at art fairs in 2017.
[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]In 2017, there were over 260 major fairs, 50 of them being added in the last 10 years …[/perfectpullquote]
On the other hand, it cost them more to attend those fairs – a total of $4.6 billion was 15 percent more than the year before. Still, a gross margin of 70 percent doesn’t seem a bad return; art fairs look like a good investment for galleries.
In 2017, there were over 260 major fairs with an international element, almost 50 of them being added in the last 10 years. You can understand why. Initially art fairs allowed dealers to work together to counter the growing power of the auction houses, recreating in some measure the same buzz as an auction sale night while showing a broad range of inventory at various price levels for a limited time. They work for collectors as well, providing an opportunity to see a variety of works in one place and to network with dealers.
More recently, art fairs have been created self-consciously for a variety of (mostly good) reasons) – to boost a nascent local art market, to add lustre to new and ambitious location, to access a wider group of potential buyers and curators, to invite novice buyers to see what’s available … the Dubai and Abu Dhabi fairs both fit the bill.
The report describes such newer fairs as “synthetic” rather than “organic”, meaning that they have been launched or promoted by civic leaders or development corporations with the primary aim of stimulating economic benefits (the “organic” model implies that the fair has been developed from existing cultural communities and is often run solely or partially by dealers “or other agents with a deep understanding of art”). Some dealers thought that the established fairs have more impact in mature markets, but clearer rated the importance of “synthetic” fairs like Art Dubai in the newer emerging markets.
[perfectpullquote align=”left” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]There appears to be no direct link between footfall and the sales made at fairs …[/perfectpullquote]
Claire McAndrew’s team didn’t attempt to count total visitor numbers across the 260+ fairs, but did estimate a million visitors for 20 of the largest and another million for 20 key regional fairs (that second group includes Art Dubai, cited at 28,000 visitors last year, and Abu Dhabi Art at a commendably precise 21,489). As the report puts it, “Major art fairs attract huge volumes of foot traffic”. On the other hand, “there appears to be no direct link between these numbers and the sales made at fairs” – so “making an important economic contribution to the cities that host them” is at least as important raison d’être for some fairs. It’s self-evident that a very small proportion of visitors actually buy anything at art fairs – indeed, a very small proportion have the means and/or the inclination to acquire art.
That may be a misapprehension, in fact; the report says that 40 percent of the prices posted for works on sale at art fairs were below the $5,000 mark. To be fair, for many good reasons dealers tend not to publicise the prices for upper-end art.
Clare McAndrew’s concludes that art fairs are essentially A Good Thing. Escalating costs clearly remain an issue for many dealers – and it’s not just the direct costs of participation; the opportunity cost of being away from the gallery for a week or more has to be taken into account. So maybe dealers will become more picky about which art fairs they patronise.
But most dealers surveyed (89 percent) felt that sales at art fairs would be stable or increase over the next five years. At the very least the art fairs can work as a marketing tool: “Some dealers were less concerned about the breakeven point at fairs, viewing them increasingly as an exhibition platform to showcase new work, introduce artists and meet new collectors, while then ‘letting the sales happen during the rest of the year’”.
Only a small number of dealers predicted that e-commerce could eventually displace some art fair sales, with platforms such as Artsy and 1stDibs presenting ‘virtual’ fairs accessible 24/7 from any location. The Global Art Market Report suggests there is little evidence of this happening in practice: “successful dealers consistently noted that online transactions and emails were sufficient for occasional transactions, but often not enough to sustain a close personal relationship, which was regarded as key in the development of longer-term buyers.
[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Fairs, at the very least, offer five minutes face time with important buyers …[/perfectpullquote]
Elsewhere the Report does notes the development of hybrid gallery operations, typically collaborative exhibition spaces like San Francisco’s Minnesota Street Project or the upcoming Cromwell Place in London, which provide exhibition, storage and office space at relatively affordable rents for a group of galleries. The tenants (and buyers) get some of the benefits of a multi-vendor art fair with the stability and year-round access to a physical gallery location. It’s entirely conceivable that online exhibitions will provide the front end to this kind of operation, with online auctions and e-commerce supplying an alternative sales medium.
Attracting buyers’ attention, getting them physically in front of the art, and making a human connection is still key to success for most galleries, and it’s probably the reason why many go to art fairs. As one gallerist put it: “Our biggest challenge this year, as it always is, is getting people’s attention … Fairs, at the very least, offer five minutes face time with important buyers.”
The Art Basel and UBS Global Art Market Report can be downloaded without charge here.
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