The art market is booming again, bigger than ever.
That was the message conveyed to the global media following last month’s marquee auctions at Christie’s, Sotheby’s and Phillips in New York.
A final installment of 20th- and 21st-century works from New York City children of divorce Harry and Linda Macklowe’s “unprecedented collection” brought the total to $922 million, making this one-stop offering the “most valuable ever at auction.” was sold”. according to Sotheby’s. Phillips’ nightly mixed-ownership sale of modern and contemporary art raised $225 million, a record for the company. Last week, Christie’s had sold Andy Warhol’s 1964 Shot Sage Blue Marilyn to Larry Gagosian for $195 million, the highest auction price ever for a 20th-century work.
“The art market no longer includes the market, it only includes auctions. It’s really the only thing people talk about,” says Lisa Schiff, founder of US-based SFA Art Advisory, commenting on the edge that livestream technology and global marketing have given the international showrooms since the rise of Covid.
Sotheby’s says its various livestream sales generated 3.6 million views during its marquee week in May. But the auction houses’ ability to shape a broader perception of the art market has led to some overblown messages.
According to Sotheby’s, this recent series of New York auctions in the three main houses was the “biggest auction season the market has ever seen”. But figures compiled by London art market analysts Pi-eX disagree. Their independently compiled figures show that May was indeed the third-highest auction series of all time: the total of 2.84 billion
Warhol’s screenprint Marilynone of a series of five such large-scale versions, was described by Alex Rotter, chairman of Christie’s for 20th and 21st Century Art, as “one of the greatest paintings of all time” alongside Botticelli’s paintings Birth of Venus and da Vinci mona lisa.
Wow. But if that’s really the case, then why? no plus ultra sell pop art to Gagosian under the proud estimate of $200 million? Is a Hollywood superstar who died 60 years ago no longer the relatable icon he once was? Or did the world’s population of more than 2,000 billionaires just think there were better ways to spend that kind of money than on art?
The Reality of Bidding
The world is being told that the top end of the art market is booming again, but beneath the shiny numbers are some new realities lurking.
Sure, the combined $922 million Sotheby’s raked in last month and November for the 65 works from the Macklowe Collection was a testament to the enduring appeal of the divorced couple’s classic Upper Manhattan flavor to brand artists like Warhol, Rothko , Twombly and Richter, practiced for more than 50 years. Proceeds well in excess of the purported $650 million global guarantee seemed to underline the status of these canonical names as enduring “blue-chip” investments, at least when offered from a long-standing name bank.
But there was noticeably less demand for high-profile works by established white male names when offered individually by anonymous sellers.
One of Cy Twomby’s major and to date highly prized “tablet” abstracts from the late 1960s is guaranteed to fetch at least $40 million at Sotheby’s Mixed-Own Contemporary Sale. In 2015, a similar “tablet” by Twombly was auctioned for $70 million. This latest example sold to a single bid from the third-party guarantor for an underestimated $38 million, a price that reflects the discounts auction supporters can enjoy.
Just four lots earlier, Francis Bacon’s Study of the Red Pope (1971), which had failed at auction five years earlier, was also guaranteed to sell for $40 million. An additional bid knocked out the guarantor, resulting in a price including fees of $46.3 million. A single bid that would normally be a raise of say $100,000 costs $8.3 million here.
“If you’re a collector, why register to bid with a paddle when you can guarantee a work and receive a discount?” says William O’Reilly, president of Dickinson’s New York branch of consultants and dealers.
But if wealthier collectors see the benefits that guarantors enjoy as buyers, that in turn may discourage paddle-registered bidders from paying more, which in turn could dampen demand for blue-chip classic works. Auction room guarantees are hard enough to understand as it is, but a New York federal court’s recent ruling that auction houses no longer have to explain such agreements has the potential to further confuse the situation and further deter inexperienced buyers.
Corresponding forbes, the world’s population of billionaires — people who can comfortably spend $200 million on a piece of art — rose from 1,209 in 2011 to 2,755 in 2021, and their total wealth nearly tripled from $4.5 trillion to $13.1 trillion . During the same period, global auction sales of fine and decorative arts fell from $32.4 billion to $26.3 billion, according to data from the Art Basel and UBS annual Art Market Report.
“The art market has been flat for the last 10 to 15 years,” says Roman Kraussl, professor of finance at the University of Luxembourg and co-author of the 2016 study “Is it worth investing in art? A selection-corrected return perspective”.
Buy now, worry about value later
“Perhaps the ultra-rich will see from all this data that the returns are not in the double digits,” says Kraussl. “When I calculate the return on art, it’s about 5%, plus costs.” By comparison, S&P 500 stocks have produced average annual returns of about 14.7% over the past decade, according to Business Insider.
“People who buy top-notch art, like a classic $25 million Richter, aren’t primarily buying it as an investment, they’re primarily buying it as a downside hedge,” says Kraussl.
But what about the people who have been clamoring for six- and seven-figure bids on paintings by young, Instagram-popular “red-chip” artists like Anna Weyant, Flora Yukhnovich, and Lucy Bull that have recently sold in galleries for five-figures? Are you buying for investment?
For Kraussl and many other market observers, this is simply a sign that a younger demographic is chasing after too much liquidity (what the rest of us call “money”) with too few available works from too few fashionable names. And buyers are wealthy enough not to worry too much about investing.
“They sold a startup for $50 million. They have white walls. What are you putting in there? No judge. This is old school. But people are afraid of buying the wrong art,” says Kräussl. “It has to be politically correct. It has to be gender specific. It must be racing OK. And then at the dinner table you can say, ‘I bought this at Phillips.’ It’s a postage stamp.”
The record $225 million raised by Phillips, which has been specializing in emerging art for years, in New York, plus the frenzy of bidding $72.9 million the following night at Sotheby’s The Now auction of 23 works from “the most exciting.” artists of today,” embodied this shift from blue to red, chip-wise. The $907,200 awarded in 2019 for a summary by Los Angeles-based Lucy Bull, represented by David Kordansky, was one of nine new auction records at Sotheby’s. The Bull artwork sold for more than 10 times its pre-sale estimate.
“What’s up? Everyone wants to get involved. There’s nothing here that makes sense in a traditional value-added scenario,” says Schiff. She remains convinced that while there’s a lot of money to be made in art, art is an investment that needs to be made in the long term performs better.”You can make money buying and selling,” she adds.[But] you can make a fortune by holding it.”
The Macklowes certainly did, although it took them half a century to get there. Can today’s buyers and sellers of digitized art wait that long?