The European Fine Art Fair (TEFAF), which opens today, has released its annual report on the state of the art market. Assembled by research and consulting firm Arts Economics’s Clare McAndrew, the annual TEFAF Art Market Report is an eagerly awaited temperature taker for the art industry—and this year’s results are astounding. Below, a sampling of the highlights.
Photo courtesy of TEFAF.
The art market is at its strongest point in recorded history
More than €51 billion* of art was traded in 2014. That marks a 7% increase over the €47.7 billion traded in 2013. It is also the highest-ever recorded transactional output by value for the art industry, beating out the 2007 pre-crash high of €48 billion. 2014 was the third consecutive year of growth.
Breaking down that growth by country and region yields some surprising results. What’s unsurprising is the seemingly unstoppable U.S. market, which grew at a rate of 10% year-on-year to a total €19.9 billion in sales in 2014. The U.S. held 39% of the global market by value in 2014, thanks to its business-friendly regulatory environment (palatable tax rates, favorable trade regulations, and no Droit de suite—also know as the artist resale right, fees paid to the creators of works sold on the secondary market) relative to those of the art market’s other major force, Europe.
Results in the U.K. were, however, slightly unexpected: the market expanded 17% after a 5% drop in transaction value in 2013. Strong results at the London auctions, particularly in the recent Iimpressionist and modern sales, no doubt helped to push those figures upwards. Nonetheless, the U.K. market remains below its 2008 peak of €14 billion.
On the Continent, Germany yielded a surprise for any who have been following dealer outrage over a significant hike in the VAT rate on art purchases. Despite trade organizations’ claims that the higher 19% rate would cause sales to tumble, the German market saw more than a 10% boost by value in 2014.
China’s economy had its most sluggish year of the last 24 in 2014 with GDP expanding at a (still rapid by developed economy standards) rate of 7.4% after many years of double-digit growth figures. That’s appearing to have a ripple effect in the art market as well. Sales declined by almost 0.5% in 2014, with the country also losing two percentage points of global market share (from 24% to 22%), ranking more or less evenly with the U.K. last year.
The very upper reaches of the market are largely responsible for driving that growth
Heady by-value numbers are a positive sign for the art trade, to be sure. But they also don’t tell the whole story. Sales volume increased at a year-over-year rate of 6% in 2014 to an estimated 38.8 million artworks sold. But volume remains significantly below its peak of the 49.8 million artworks traded in 2007. There are two general takeaways here. On the one hand, it could be that average work prices are rising—a quick look at the increase in sums commanded lately for works by emerging artists wouldn’t make that hard to believe.
But hard data suggests a slightly different picture and one vastly appropriate for a year in which pseudo-intellectual conversations were dominated by Thomas Piketty’s 2013 book Capital in the Twenty-First Century: the market is ballooning (notice I don’t say bubbling) at the top. According to the report, 48% of the art market was comprised of a mere 0.5% of works sold in 2014. At auction, 1,530 lots achieved prices over €1 million—the cutoff for that 0.5% marker—while 96 lots made over €10 million. It makes sense. Due to particularly favorable economic outcomes for those in the “ultra-high net worth” set, the price of competing for artworks to nominally higher prices is relatively less expensive than it would be for those even in the “high net worth” bracket.
Online marketplaces are helping to balance the top-heavy art trade—and expanding at rates above projections
In the 2014 TEFAF report McAndrew projected an annual growth rate for the online art industry of 25%. We knew Artsy had a good year in 2014, but according to the 2015 report, we weren’t alone. Online sales reached a conservative estimate of $3.3 billion in 2014. That represents a 32% year-over-year increase over the estimated €2.5 billion in sales achieved by the sector in 2013. The online sector also grew in its overall share of the art market, from 5% in 2013 to 6% in 2014.
In contrast to the art market as a whole—and growth among dealers, which has been highest among those with gross revenues of over €10 million per year—the online market reported that 67% of its sales occur in the $1,000–$50,000 range. Continued expansion in the online sector should add stability to the market over time.
Across the art industry, outlooks are bullish about the online market’s prospects. Among dealers surveyed for the report, 65% said that online marketplaces were influencing the art market in positive ways (13% were undecided), with 73% expressing confidence in continued increases in their online sales. As McAndrew points out, if online art sales increase at only half the rate of online sales in the rest of the luxury sector, the market segment will reach €5 billion in as few as three years. If rates mirror the 2013 to 2014 increase, the €5 billion mark will be reached in less than two years.
The art market is more global than ever
Online marketplaces have certainly eliminated some transactional friction for both collectors and dealers based many thousands of miles away from each other. (The average inquiry distance on Artsy in 2014 was 2,700 miles.) The art trade as a whole hit new heights in terms of international trade in the most recently reported year as well. (Trade data is reported on a one-year delay in the TEFAF Report due to available information.) Imports and exports of art both increased 10% over 2012, to €19.3 billion and €19.8 billion, respectively—both numbers being the highest totals yet recorded. The dominant marketplaces of the U.S. and the U.K. accounted for 62% of imports and 60% of exports in 2013. The trade figures also reveal interesting data about the continued growth in the importance of freeports, such as those located in Switzerland and Luxembourg. Capacity expansion projects for art storage at freeport facilities are underway. And—though the report doesn’t back this up definitively—the unequal balance of trade for the industry as a whole suggests that a net increase of €500 million in art was placed in freeport facilities in 2013.
Fairs had a good year in 2014
Gallery and dealer sales made up an estimated 52% of output in the art trade, by value, in 2014. It will come as no surprise to many that art fairs played a growing role in facilitating those figures. Fair sales accounted for 40% of dealer revenue in 2014, up from 33% the previous year.
There are also more international fairs than ever. Whereas in 2000 only 55 fairs included international participants, in 2014, no fewer than 180 international fairs took place—with over a million visitors attending the top 22. Though a significant cohort of dealers grumble lately that fair costs can often outweigh the benefits of participating, for the art trade as a whole, they’ve proven a good investment. Fairs remain the second-highest expenditure for the art industry at large, even though only galleries pay for them: €2.3 billion, or 19% of total expenditures, up from €1.9 billion in 2013. And spending 19% of your budget to achieve 40% of your revenue is not a bad bet.
The post-war & contemporary sector continued to grow in 2014
Works from the sector contributed 48% of sales by value across the market, up from 46% in 2013. At auction, an all-time high of €5.9 billion on post-war and contemporary art was sold last year. Two auctions in the sector at Christie’s alone—their $852.9 million sale in last November and $745 million sale the May before—contributed 27% of that total. (Both auctions set records for the highest-ever total for a single sale when they occurred.)
Market share proceeded in inverse to works’ time of creation throughout the art trade, with modern art accounting for 28% of the art market as a whole, impressionist and post-impressionist works accounting for 12%, and Old Masters accounting for 8%. This is by no means a new state of affairs for the art trade, which has been dominated by post-war and contemporary art since 2007. Sector allocations by value also varied only slightly in 2014 over 2013: contemporary up 2%, modern down 1%, impressionism down 1%, Old Masters down 2%. Relative to their respective 2013 performance, every sector grew in 2014, however.
The art market is a significant job creator
The art trade was made up of 309,000 companies, which employed 2.8 million people in 2014. It also created an estimated 438,000 jobs in ancillary industries. That’s a remarkable amount of employment in comparison to other entities with similar total revenues. To borrow McAndrew’s deft analogy, Google, Ford, and Daimler each have annual gross revenues equal to or even double that of the art trade. However, Google employed an estimated 50,000 people in 2014, Ford around 181,000, and Daimler around 275,000.
*Due to dramatic changes in the value of the euro during 2014, we have elected to present all figures in euros for accuracy.