Maneuvering the art market can be unsettling for collectors, dealers, gallery owners, auctioneers and artists.
The global nature of today’s art market provides opportunities for collectors to ride out highs and lows — especially if they are willing to explore new and emerging regions.
In 2016, the art market faced the first down year in total art auction sales since 2009. But the first six months of 2017 brought record-setting prices on pieces by Jean-Michel Basquiat, Constantin Brâncusi and Peter Doig, which prompted murmurs of a potential economic bubble in the contemporary art market.
“The art world’s cross-currents are complex and can be downright mystifying,” says Mac MacLellan, president of the central region for Northern Trust Wealth Management. “It’s critical to understand what’s going on globally because it could have a long-term impact on your collection, no matter how big or small.”
Through a series of discussions with Wealth, three art experts offered their insight and analysis of the current state of the art market: London-based Bomi Odufunade, director of global art advisory at Dash & Rallo; Adriano Picinati di Torcello, a director with Deloitte Art & Finance in Luxembourg; and Canice Prendergast, a professor of economics at the University of Chicago and chair of the University of Chicago Booth School’s Art Collection Committee.
Wealth: To start, how does the art world currently fit into the broader global economic and social landscape?
Prendergast: I think it’s important to distinguish between the art market and the art world. The art market is very bifurcated in that the top 1 to 2 percent of galleries are part of an enormous boom in the auction world, but outside of that, there’s a quiet desperation. Meanwhile, in the art world, there’s a sense of almost existential angst. Between Brexit, the last U.S. election, the situation in Syria and the refugee crisis in Europe, contemporary art’s role in social discourse is very low.
Odufunade: Globalization allows for a quite fluid art market, so downturns may now be viewed as opportunities. For example, as Portugal’s economy has recovered over the last couple of years, it has re-energized and regenerated cities such as Lisbon, which now has a flourishing art scene. We have to embrace the possibility that new challenges can lead to cultural explosions.
Picinati di Torcello: Countries, especially those with old economies, have to find new ways to support economic growth and many are looking to art and culture. For example, in France, they’re not just focused on art creation but attracting tourists through culture, which increases spending and creates more interest in France in general.
Wealth: Turning to Brexit, how could the United Kingdom’s exit from the European Union (EU) undermine current conditions?
Odufunade: Everyone I talk to is very cautious. More cautious than, say, during a recession, because with a recession, you know it will come back up. But with this, nobody knows what’s going to happen. Plus, it’s not just how the trading, currency exchanges or taxing matters could change in the London market, but it’s managing the gallery staffs, which come from all over Europe. The freedom of movement granted by the EU has been key for the art world. But if galleries suddenly have to pay for visas for each of their staff, I don’t believe they’ll all do it, especially the small and midsized galleries.
Prendergast: Ultimately, whatever happens in London’s financial sector is going to affect the art market there because of the connections between those two industries. That said, I’ve heard some debate that Brexit could lead to a more decentralized European art market since London won’t have the pre-eminent position anymore. And that feels a little healthier if we start to see more active markets and galleries in cities such as Paris, Amsterdam, Brussels and Frankfurt, in addition to, of course, Berlin.
Wealth: Looking ahead, what else could potentially influence the art world?
Picinati di Torcello: The penetration of technology and the internet has disrupted the market to a certain extent in terms of sales, transparency and the way business is done — not only in the growth in art dealers using online sales tools, but in the ability to use technology to resolve issues around authenticity, security and provenance, which can enhance trust matters related to the providers as well as the actual art objects.
Odufunade: I think the globalization of the art market has created interesting opportunities for collectors. Art fairs are more regionalized, so you have a chance to see something new from different countries. It opens up an awareness of other artists and gives them a profile within the contemporary art market. I think we have all realized that these differences have made the market more interesting and it is an opportunity to engage in various cultures. The idea of going to Art Dubai to sample what is artistically happening in the Middle East is interesting, or going to Joburg Art Fair in South Africa, or even Zona Maco in Mexico. I think it is important that this is organically evolving and not being dictated by one singular voice. After all, if every art fair were the same, then they would be incredibly repetitive and boring.
Prendergast: For almost the first time in history, we seem to have a lot of high wealth individuals who seem to want to spend their money on contemporary art, and that’s certainly leading to historically high prices. Recently, however, I’ve been struck by the prices of objects that have historical, monumental importance, relative to the price of contemporary art. For example, original copies of the Emancipation Proclamation and the 13th Amendment — both signed by Abraham Lincoln — sold for less than $2.5 million each in 2016. Yet there are hundreds and hundreds of paintings in the contemporary art world that you cannot buy for $2 million — that part is concerning.
Wealth: What about the creative core of the art world, the artists?
Picinati di Torcello: When prices go through the roof on high-end pieces, a limited number of artists directly benefit. On the other hand, the higher prices tend to generate more intrigue or interest from a larger audience, and with that visibility, more people become more active in the art world. And that allows more artists to live off their creations.
Odufunade: Having worked in a museum, a commercial gallery and now with artists, I do know that when an artist’s work has gone crazy at auction, it makes the artist nervous. Everyone enjoys success and the money that comes with it, but some are cautious over how quickly that success happens.
Prendergast: I think the current market conditions prompt a question that nobody has a good answer to yet: To what effect does demand by collectors determine the production of certain kinds of art? Is it the case where great Masters of Fine Arts students are saying that’s where the money is and where I should be? In the market for cultural goods, you sometimes want such avant-garde work that initially we all think it’s totally dreadful. I don’t know if we’re getting that [level of experimentation] today, and I think it’s certainly a concern.