Art Market

What You Need to Know from the Art Market 2020 Report

Benjamin Sutton
Mar 5, 2020 10:54PM

Sotheby’s pre-sale exhibition of Irish art that went up for auction in November 2019. Photo by Charles McQuillan/Getty Images for Sotheby's.

The global art market shrunk by 5% in 2019 with a total of $64.1 billion in sales, according to economist Clare McAndrew’s report “The Art Market 2020,” released by Art Basel and UBS on Thursday. That represented a drop of $3.3 billion in sales from 2018, which was the art market’s biggest year in half a decade, with total sales of $67.4 billion.

The report seems to confirm what many observers had speculated: that a string of geopolitical conflicts, trade disputes, and political upheavals created a more cautious market generally, and that a dearth of masterpieces coming to auction—especially in the second half of the year—had made for a sluggish year.

The world’s three biggest art markets—the United States, China, and the United Kingdom—all saw declines in 2019, in no small part due to macroeconomic and political factors such as the U.S.–China trade war and the protracted Brexit negotiations. Geopolitical factors may have also held up the supply of major works coming to auction, leading to a 17% drop in auction sales from 2018 to 2019. Last year saw a total of $24.2 billion in sales of fine art, antiques, and decorative art at public auctions.

Auction sales take a hit

The drop was especially acute at the top level of the auction market, with lots that sold for more than $10 million accounting for 20% of all auction sales by value in 2019, down from 28% of all auction sales in 2018. That year-on-year decline bolsters recent market analysis that identified a drop in major lots coming to auction in the latter half of 2019.

“This year it was the high end that had the worst fall in terms of year-on-year value,” McAndrew said. “With so much going on and so many things happening where you think people’s minds couldn’t be on fine art and antiques, the market probably did quite well considering, even though it declined.”

While the climate of global tension that defined 2019 may have led some would-be buyers and sellers to hold back on executing major transactions at auction, others opted to do their business privately. Private sales at Christie’s and Phillips increased dramatically in 2019—by 24% to $811 million and by 34% to $172 million, respectively. At Sotheby’s, private sales held stable at about $1 billion.

“What we saw in previous years, like 2016, is that when the general context is kind of uncertain and there’s a lot of anxiety, people tend to either hold back completely, especially at the high end, or they do things that are perceived to be slightly safer, like selling things privately,” McAndrew said.

Uneven gallery growth

Collectors pursuing potentially safer means of selling art meant not only growth for auction houses’ private sales businesses, but also that gallery sales held steady, ticking up 2% year-on-year, for a total of $36.8 billion. That figure represented 58% of the overall market by value in 2019. That growth was erratically distributed among galleries of varying sizes: Galleries with annual turnovers between $250,000 and $500,000 and over $30 million saw their aggregate turnovers spike 17% and 16%, respectively; galleries with annual turnovers between $500,000 and $1 million, meanwhile, saw their aggregate turnovers drop 9% in 2019.

Big-ticket sales of works priced above $1 million drove the gallery market in 2019 even more so than in 2018. Sales of works for more than $1 million, while accounting for only 2% of all gallery sales by volume, accounted for a full 42% of all gallery sales by value. Meanwhile, the vast majority—84%—of sales by volume were works priced below $50,000, which accounted for only 27% of sales by value.

Some galleries fair better than others

The report’s art fair data underlined similar tensions between galleries with high annual turnovers and smaller outfits. Galleries with sales in excess of $10 million participated in twice as many fairs (eight) as the average for all galleries (four) in 2019. Sales at fairs also accounted for nearly half (47%) of all sales for galleries with an annual turnover of more than $10 million. However, for galleries with annual turnovers less than $500,000, fair sales accounted for just 30% of their business. For some smaller galleries, going to fairs to get 30% of their sales may not be enough to cover the enormous costs and logistical burdens of participation—dealers’ art fair costs for 2019 were estimated to total $4.6 billion.

“The costs tend to rise in tandem for everyone, but the sales very much skew toward the bigger galleries,” McAndrew said. “I’m not saying that some smaller galleries had very good things to say—that they do well at fairs, and they wouldn’t be able to get any kind of international foothold without them—but that is a big issue.”

One illuminating new metric in the report measures exactly what share of sales at fairs actually happen during fairs. This data is potentially useful in explaining how mega-galleries—many of which have staffers dedicated exclusively to collector relations and fair programming—are able to thrive in a fair setting. It has become accepted practice for galleries to circulate checklists of works by highly sought-after artists to top-tier collectors in the lead-up to a fair, so that many works may already be unavailable by the time the first VIPs step into the booth. Dealers reported making 15% of their fair sales (transactions that amounted to $2.5 billion) before fairs opened, and another 21% ($3.5 billion) after fairs had closed. Still, the majority of fair sales—64%, or $10.6 billion—actually happened during the fairs.

“A lot of the motivation for doing fairs is to generate that same kind of buzz you might get from it being a limited-time sale and a little competitive with other buyers,” McAndrew said. “It shows that there are so many layers of VIPs now—at the fair itself, but then there are all the ones that get access way before the fair.”

Connecting with new collectors online

And while fairs may still be a viable way for galleries to transact with collectors they already know—before, during, and after the fair—the report found that online sales are a potentially powerful mechanism for dealers to find new buyers. According to McAndrew’s analysis (which relied, in part, on data provided by Artsy), dealers made 37% of their sales to collectors who’d been working with the gallery for one to five years, with new buyers accounting for 34% of all sales. Meanwhile, dealers who sold works online in 2019 reported that 57% of those sales were to new buyers.

But even as online sales seemed to be bringing new collectors into the fold, their overall numbers declined slightly in 2019—down 2% to $5.9 billion, or 9% of the total art market—fairing only slightly better than the market’s overall dip. Those numbers lag behind the overall retail market, where 14% of sales took place online in 2019 (up from 12% in 2018). Online sales accounted for just 5% of dealers’ sales in 2019, with 3% happening on galleries’ own portals and websites, and the other 2% taking place on third-party platforms.

“There was a lot of headwind against the art market last year, whether it was tariffs, protectionist measures impacting how goods travel, sustainability issues, all these things,” McAndrew said. “And now with the coronavirus, it will be interesting to see—will it have a big effect on online sales or will the whole market get really subdued for a while?”

While online art sales did not see many big effects in 2019—despite galleries like Gagosian and David Zwirner doing serious business through their online viewing rooms—the report found that online sales had outsized significance for smaller galleries. Online sales accounted for 12% of all sales by value for galleries with turnover under $1 million, while they contributed only 1% of all sales by value for galleries with annual turnover of more than $10 million.

Millennials making moves

Among collectors, McAndrew found that the surest indicator of online buying—and buying overall—is age: 92% of millennial collectors reported having bought art online. Her survey of more than 1,300 high-net-worth individuals also found that millennials were the most active collector cohort, with average total expenditures on art and collectibles of $3 million over a two-year period. Millennials now make up nearly half (49%) of all collectors globally, according to the report.

Millennial collectors were also the most active consignors, with 71% of millennial collectors saying they’d resold works from their collections (compared to just one-third of boomer collectors). The report also showed a high rate of resales overall, with an average turnaround time between the original purchase of a work and its resale of just four years.

“When you ask people their motivations for buying, everybody says ‘I buy it for passion’ and things like that, but when you look at their actual behavior, they’re getting in and out quickly, they have stuff in storage, some of them in long-term storage,” McAndrew said. “They’re acting very financially for being so aesthetically motivated.”

The outlook for 2020

As the new decade dawned, there had been some optimism that the market would see a bounce-back year in 2020, especially with the prospect of two extremely valuable collections (those of Donald Marron and Harry and Linda Macklowe) coming to the secondary market. But the global coronavirus crisis has severely dimmed those hopes, leading to the cancellation of several fairs (most notably Art Basel in Hong Kong and its satellite Art Central), the postponement and relocation of auctions, and a generally dire mood in an industry that remains largely dependent on gathering hundreds or thousands of people in confined spaces to make sales.

“It will have to have an impact, I can’t see it not having an impact, but I do think it depends how long [the coronavirus crisis] goes for,” McAndrew said. “People will be back at it quickly because it’s such a diverse market now. The same thing happened [after the financial crisis] in 2009—by 2010 the market was away again, it didn’t take a decade to come back.”

Benjamin Sutton