Despite the crisis, the art market has already proved its resilience

Updated: Jan 17

As the coronavirus is spreading around the world, the global economy is entering a difficult phase, and the art market is no exception. As a matter of fact, all the major art events of the first semester – art fairs and auction sales alike – have been canceled in the last few weeks/days, thus taking a toll on an industry largely dependent on such gatherings. And yet, the art market has already proved to be resilient in times of crisis, and especially during the recession following the subprime turmoil, which explains its reputation as a lower risk, safe haven investment.



When Art Basel announced the cancellation of its mid-March 2020 edition in Hong Kong, the coronavirus was still perceived as a distant threat from Asia. But the virus outbreak has since forced key players of the art world to take similar steps, and the spread of containment measures in Europe did not help. Major museums and galleries had to shut down for at least a few weeks and not only in France or Italy. Indeed, the Metropolitan Museum of Art announced that it was indefinitely closing last Friday, which is no good news for other cultural institutions in the US.


Public-health concerns have also encouraged other art fairs to postpone or even cancel their events, beginning with Art Basel Hong Kong and soon followed by TEFAF Maastricht – after an Italian exhibitor was infected by the virus – Frieze New York and Art Brussels, which was pushed back to June. As for Art Basel, some believe that it will either be canceled or postponed even though no announcement has been made yet by the Swiss art fair.

The much talked-about Saint-Laurent sale brought in an outstanding $438.8 million in the midst of the recession.

At the same time, galleries were forced to close, including high-profile institutions such as Gagosian, Hauser & Wirth or David Zwirner. These closures represent a severe loss of income for galleries – somewhere between 45 and 80% according to the last Art Basel report – whose revenue mainly derives from recurring events like art fairs and indoor exhibitions. It is all the more difficult for them since fixed cost have dramatically increased in the last few years as they kept seeking for larger spaces and more staff.


Last but not least, auction houses have postponed their May sales to June. In this context, key players are developing their online services, such as Art Basel and its online viewing rooms designed to « replace » the canceled event – the platform is actually well designed – or David Zwirner’s online space, through which the gallery sold 6 major pieces last Wednesday, including a $2.6 million painting by Marlene Dumas. At least the epidemic has one positive effect on the « old-fashioned » art industry: it is finally accelerating its digital transition after years of delay.


And yet, despite its deficiencies, the art world remains a safer market than the stock exchange for investors, especially in times of economic crises. The last financial turmoil of 2007 demonstrated this characteristic, as the volume of sales took 2 years to decrease significantly after the crisis. Indeed, the lowest point was reached in 2009, as shown in this graphic by Art Economics (2018).


This shows that a substantial amount of liquidity generated by the sale of assets in the middle of the crisis was reinvested in art. This was very clear in 2009, as the record-breaking Saint-Laurent sales brought-in an outstanding $438.8 million in the midst of the recession. Another fun fact is that Damien Hirst organized his much talked-about auction sale at Sotheby’s – which grossed a record-breaking $200 million – the same day as Lehman Brothers collapse.


Although the 2009 decrease in sales volume seemed pretty harsh, it was nothing in comparison with the S&P 500, an index that gives a good overview of the American stock market. Indeed, while sales volume at auction shrinked by 27.2% that year, the S&P fell twice as much with a 57% loss; and it took only 2 more years for the art market to exceed its 2007 level, while the stock exchange had to wait until 2013 to do so.


Furthermore, the rebound for the top-end of the art market was considerably higher than the rest of the economy in the mid-2010’s. According to an Art Price study, the Artprice 100 index which aggregates the performances of the top 100 artist in the world each year – and a large proportion of the artists we sell are positioned at the end of this ranking list – clearly outperformed the S&P 500 from 2009 to 2016, as shown in this graphic:


Another interesting fact is that most of the art market decline between 2007 and 2009 can be accounted for by a lackluster offer at the top end of the market – and especially for works above $5 million – as collectors, who have the financial capacity to retain valuable assets, preferred to wait for the economic upturn to sell their best pieces. The same phenomenon was observed in 2019 amidst the economic anxiety surrounding the Brexit and the commercial war between China and the US, while the mid-market remained dynamic.


The subprime crisis took its heavier toll on contemporary art in the early 2010’s, thus proving that this segment is the main adjustment variable of the market. This is no good news for speculative artists, especially within the younger generation, who will certainly suffer most from the current economic crisis.


Before the subprime turmoil, the last major crisis that affected the art world was the 1990’s crash, which lasted much longer than the last recession. Indeed, according to the economist Clare McAndrew quoted in a recent article published in the Art Newspaper, « it took about 15 years for the market to get back to its late 1980’s, pre-recession level. » But the situation was completely different at that time, as the market was shaped for a precise collector’s profile : industrial magnates from Japan, Europe or the US.


A picture from the record-breaking Damien Hirst auction sale which took place the same day as Lehmann Brothers collapse.

Since that time, the rise of new successful industries especially in the high-tech business as well as the dramatic rise of developing countries has completely disrupted the art market with a flood of new collectors from all around the world. This is particularly true for China, which is now the second country by number of millionaires, while it was not even in the list 20 years ago. In other words, the skyrocketing number of high-net worth individuals around the world has reshaped the geography and the dynamic of the market.


In the middle of the current crisis, we notice that auction houses are receiving more sale offers than usual, as a growing number of investors and collectors want to get their money back in these times of uncertainty. However, the absorption capacity of the market is still high, with a sustained demand for well-priced works. One result of this global turmoil is that most buyers are now turning to the private segment of the art market – whether it be through advisors, or private sales with galleries or auction houses – to acquire pieces. Indeed, we know for a fact that Christie’s and Sotheby’s private sales departments are currently performing very well.


Furthermore, the wariness among stock market investors, who have lost significant amounts during the current crisis, will likely encourage them to diversify their investments, particularly by investing in art – an asset that has the advantage of incorporating a substantial pleasure component.


The next auction sales in June, which are known to be a barometer for the market’s health – if they are maintained – will be the first major post-quarantine art world events. Before then, our advice for collectors is to keep their works until the market recovery, and, for those who can afford it, to take advantage of the current situation by acquiring pieces by blue-chip artists at a fair price.

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