The New York fall auctions just went by. They were nervously anticipated by most market players, as the auctions that would once and for all tell us if we are in a recession or not. Indeed, it’s no news: since the Paul Allen sales of November 2022, the art market was by all accounts slowing down. As we have seen in previous articles, everything was unsure these last few months, as a vicious circle emerged where a contraction of both supply and demand mutually reinforced each other. And so, naturally, most art market players were on high alert this November in New York. Thomas Seydoux— a former major Christie’s executive turned private art dealer—, went as far as calling the sales “judgment day”. Well, the hammer has fallen, and the judgment has been made: the slowdown was not a recession, and the art market is slowly making a comeback. Upon looking at certain figures, one could still think that the New York auctions displayed mixed results—with neither particularly good nor catastrophic figures, just like the London auction sales a few weeks prior. Additionally, as we will see below, auction houses are paying an increasing toll for the price-guarantee mechanisms which keep saving the day… But despite all of this, the takeaways from these sales are still quite positive for the art market.
At first glance, some sales did very well. Sotheby’s Fischer Landau evening sale alone generated a large sale’s revenue of $406,4 million. It featured “star” artworks by the likes of Picasso and Agnes Martin, which broke historical highs in terms of prices. Reaching $139,4 million, Femme à la montre (1932) by Picasso became the second most expensive work by the painter ever sold at auction, and Agnes Martin’s Grey Stone II (1961) became the priciest work ever by the abstract expressionist at $18.7 million (more than thrice its presale low estimate of $6 million). The sale also featured three important works by Ed Ruscha, one of which—Securing the Last Letter (Boss) (1964)—became, at $39.4 million, the second most expensive work by the acclaimed pop artist. The positive results of the New York sales were thus not exclusive to the biggest names of modern art: they were witnessed across all segments, even for contemporary and sometimes “ultra-contemporary” artworks. At “The Now” evening sale by Sotheby’s, which took place on November 15, the painting Walkers With the Dawn and Morning (2008) by Julie Mehretu became her auction record (at $10.7 million) and the most expensive work by an African-born artist ever sold at auction.
As for the sale itself, at $55,2 million, it generated 20,4% more revenues than last year’s equivalent sale ($45,83 million)—a great sign for the contemporary segment of the art market. During Sotheby’s Contemporary Evening Sale which followed on the same night, a handful of contemporary artists also attained record prices. Such was the case for Amy Sillman, Barbara Chase-Riboud, and Barkley L. Hendricks, to name a few, who all broke their previous auction records. If the revenue for that sale decreased by 6.9% compared to last year ($250.5 million this time around, and 269.1 million in 2022), it still did well in many regards, with a sell-through rate of 93.5% and many works by blue-chip artists achieving honorable prices. Such was the case for Basquiat’s Self-Portrait as a Heel (Part Two), which sold for $39 million (hammer price)—just below its low estimate of $40 million but, truth be told, not really a disappointing price for such a work.
Interestingly, if one only compares the gap between low estimates on lots and their final hammer price, one could assume that the New York sales, just like the past evening sales of May 2023, were a bit disappointing. The Emily Fischer Landau evening sale at Sotheby’s—the feats of which we just mentioned—is paradoxically an example of this: the total sum of hammer prices ($351 million) only exceeded the total sum of low estimates ($344.5 million) by $ 6.5 million. But upon taking a closer look at the lots, you soon realize that many hammer prices realized were in fact quite good results relative to the qualities of each specific artwork (aesthetic quality, size, production date, etc.). And the same can be said of several other sales. This apparent paradox is partly explained by the fact that the estimates provided by the auction houses were sometimes quite high in order to draw in consignors and ward off the crisis of supply which had become prevalent these last six months (especially on the high-end of the market, as explained in our analysis of H1 2023). It seems that this was a winning bet: the overall quality of the lots on offer at the evening sales in New York was quite surprising. Over 160 of the lots on offer were estimated to be worth over $ 1 million, and almost 30 lots in excess of 10 million dollars (and sometimes well above, with estimates in the $ 20-30 million mark). and the dimensions of a lot of the artworks on offer were often exceptional as well—not only in the Fischer Landau sale, but also across several multi-owner evening sales. Lastly, the freshness to the market of the lots should be noted: most of the exceptional works on offer were never before seen at auctions. Of course, another way auction houses managed to draw in the consignors of these great artworks—as testified by the Fischer Landau collection—was, as per usual, by promising sellers a high-level of price guarantees. We will expand on this topic further down. But the bottom line is, in every regard, the lots on display this November in New York most definitely surpassed the types of works we were getting used to seeing at major evening sales from Sotheby’s, Christie’s, and Phillips since the beginning of 2023.
As far as art market demand is concerned, although things are far from being perfect, they are getting better too. As Mr. Seydoux reminds us in the interview previously mentioned, there was a lot of hesitation for buyers these last few months on what he calls “the middle market” (artworks worth around $ 3 to 5 million). According to him, this was true both on the private market and at auctions, and reaching the low estimate was quite difficult even for works by blue-chip artists. This fact was a bit camouflaged by the third-party guarantees system: with irrevocable bids, things end-up being sold anyways, and once you include the buyer’s premium in the final price, auction results look a bit shinier than they truly are. But everybody knew the true state of things: overall demand was skittish at best, and consequently reinforced for high-end works. In other words, what we have already described in our analysis of H1 2023—buyers becoming weary of acquiring what could be qualified as “unexceptional” lots, even by blue-chip artists—became prevalent. The Survey of Global Collecting which was recently published by Art Basel & UBS once more confirms this dynamic if one was still unsure. Citing this report in one of its recent articles, Artnet explains that if auction revenues and art spending by high net worth individuals have decreased in the first six months of 2023 (compared to the same period in 2022), on the other hand, the share of collectors seeking to buy artworks priced over $1 million increased. The better overall quality of supply for these New York fall auctions was thus largely welcomed by buyers, and sufficient bidding ensued to save the day. The New York sales hence managed to at least deflect the fears that the art market would enter a long phase of recession. They also indicated a regain of trust in the price estimates provided by auction houseson the great names of modern and contemporary art.
Something should also be said here about third-party guarantees, which also reflect—at least to some extent—the level of demand. Indeed, third-party guarantees quite simply take the form of irrevocable bids (for a detailed explanation of these mechanisms, see our recent article on the subject). Thus, even if these irrevocable bids are oftentimes contracted by professionals aiming at making an easy profit rather than private collectors, they still remain an indication of what art market players believe the works to be worth at a minimum. But about ten days before the start of these New York evening sales, a lot of important artworks remained without guarantees of any sort. This was notable for instance on the modern art segment of the market. In their Modern Evening Auction, Sotheby’s had Japanese consignment which included a popular series from Monet (estimated $30-40 million) and a 1924 Chagall entitled “Au-dessus de la ville” (estimated $12-18 million) that were still unguaranteed at the time; this was also true for the Balthus (estimated also $12-18 million). As for Christie’s, its 20th Century Evening Sale comprised a Still Life by Cézanne (estimated $35-55 million), a Signac (estimated $15-25 million) and a Black and white Picasso from the 1960s (estimated $10-15 million) that were also still unguaranteed about ten days out. On top of that, several lots were initially backed by the auction house and not yet backed by third party guarantees. This was also true for quite a few expensive works of contemporary art across the board in the main evening sales. For example, the Fischer Landau sale was fully guaranteed by Sotheby’s as soon as they got the consignment (precisely because auction houses compete with each other by promising a certain amount of guaranteed sales revenues to attract consignors), but it remained to be seen which amount of the in-house guarantee would end up as irrevocable bids by third parties.
These last few months, the bearish context made it more difficult than before for auction houses to resell their in-house guarantees. The main question before the sales finally did unfold was thus: would the auction houses manage to resell their in-house guarantees to third-parties? As we know, this is a process that can occur up to the very last minute before bidding start on a given lot, and total lack of interest for a given lot can lead to it being withdrawn during the sale itself, right before it goes up for sale. It is however in the guarantor’s interest to wait as long as possible before entering negotiations with an auction house, as the latter is pressed to resell its in-house guarantees to mitigate exposure (it goes without saying it is not in an auction house’s interest to acquire most of the works it is supposed to be selling). Evidently, this was once more a prevalent market tactic this time around as, overall, the New York evening sales ended up being strongly guaranteed by third parties. In the case of the Fischer Landau evening sale by Sotheby’s, 23 out of the 31 lots which went on sale ended up having irrevocable bids. Sotheby’s Modern Evening Auction had $101.7 million guaranteed by third parties (56% of the total sum of its low estimates). The Now Evening Auction had up to 79.9% of the total sum of its low estimates guaranteed through irrevocable bids, and that figure reached 87.6% for the Contemporary Evening Auction. Christie’s 20th Century Evening Sale was also heavily guaranteed by third parties, with 63% of the total sum of its low estimates guaranteed through irrevocable bids (last May, the figure was 50.5% for Christie’s homonymous 20th Century Evening Sale). However, it should be noted that the 21st Century Evening Sale by Christie’s attracted very little third parties interesting in placing an irrevocable bid: only 25.6% of the total sum of the sale’s low estimates ended up being guaranteed by third parties. In comparison, that figure had reached 77,9%, for the 21st Century Evening Sale of May 2023. One could assume that Sotheby’s managed to swoop most of them with its Fischer Landau and “The Now” evening auctions.
If these figures are a good sign regarding the state of demand on the art market, they also once more showed that the price-guarantee mechanisms are central to ensuring year-to-year stability in price hikes on the art market. In our analysis of H1 2023, we wrote about the increasing impact of auction house guarantee mechanisms on the valuation of artworks, especially on the so-called “trophy lots” at the high-end of the art market. But what we (and everyone else) predicted is also happening: auction houses are starting to pay an increasingly heavy toll for trying to maintain prices and prestige on their shoulders like an art market Sisyphus. As explained in a recent New York Times article, the guarantee mechanisms are severely cutting into the profits made by auction houses during the major evening sales, accentuating the portion of auction house turnover dependent on the day sales. The most notable example mentioned is the Rothko that sold for $22.16 million—well under its low estimate of $30 million—during the Fischer Landau sale, which incurred Sotheby’s a considerable financial loss in order to preserve the prestigious sale’s 100% sell-through rate. In a market where the price increases are more and more polarized towards the high-end of the market, leaving behind more and more ordinary works by blue-chip artist, this dynamic could end up being worrying in the long term for the business model of auction houses. As of now, the New York evening sales did send a positive message to worldwide collectors: the prices of modern and contemporary artworks are still backed by strong institutional mechanisms and, although not living its best days, the art market is still standing on solid ground.