Art Economy Spring/Summer 2016

ART ECONOMY
1. NEW YORK - Gigaweek Closes As Christie’s Imp-Mod Is Managed to a Soft Landing
May 13, 2016 by Marion Maneker
Rumbler in the Box
Even in its reduced state, the current week of auctions in New York has resulted in slightly more than $1bn in sales. This season’s gigaweek was accomplished not by the addition of special sale but by the combination of Impressionist, Modern and Contemporary markets into a single weeks of sales.
Will the outcome be sales line-ups that merge the categories and featured evening sales that set the tone across categories and day sales focused on specific sub-markets? Possibly. Or this week’s sales could be a reflection of a broader cautiousness in global markets for real estate, financial products and commodities.
“The volumes are down hugely,” said Philip Hoffman, chief executive officer of Fine Art Fund Group in London. “People were not prepared to consign major works after the January collapse of the stock market. Everyone was worried if they would be able to sell.”
Comparing art markets against equity markets is rarely productive. In this case, the January stock swoon might have affected consignments but the current market strength ought to have brought out the buyers. Kazakina also heard another variation on the idea that demand remains but supply has been truncated:
“There’s money and there’s willingness,” said Michaela de Pury, a private art dealer based in London, who bought a $15.4 million painting by Cy Twombly for a client at Sotheby’s on Wednesday. Auction houses “need to focus on getting in triple-A works at good prices. Then the market would do very well.”
Finally, Bloomberg’s reporter spoke to a dealer and former auction house employee who was just not impressed:
“There was not much to get excited about in this sale,” said Emmanuel Di Donna, whose New York gallery specializes in modern and postwar art. “They’ve covered their base and often sold on one bid. Feels selective.”
The natural question is whether this fresh face is bidding for the now sought-after Asian clientele. Here’s Duray on the matter:
Asian bidding seemed strong on the phones, especially for the Hepworth and another Monet. At the press conference after the sale Jussi Pylkkanen, Christie’s global president, put Asian buying at around “20% by lot”, the same as the auction house’s earlier sales in the week.
After a rough go at Sotheby’s on Monday evening, when four of the eight Pablo Picasso works failed to sell, the atmosphere changed for the better on Thursday, with all nine at Christie’s selling, including “Homme assis” from 1969, a late and richly colored Mousqetaire swordsman outfitted in a yellow doublet, which sold to international dealer David Nahmad for $8,005,000 (est. $8-12 million).
Christie’s Imp-Mod Auction Totals $141.5 M., Secures Record With $8 M. Frida Kahlo  (ARTnews)
In Gun-Shy Art Market, Bellwether Auctions Decline More Than 50%  (Bloomberg)
Impressionist and Modern Works at Christie’s Stir Little Excitement  (The New York Times)
Tepid Impressionist and Modern sale at Christie’s concludes New York auction week (The Art Newspaper)
Christie’s Mild-Mannered Imp/Mod Closer  (BLOUIN ARTINFO)
http://www.artmarketmonitor.com/2016/05/13/gigaweek-closes-as-christies-imp-mod-is-managed-to-a-soft-landing/

2. NEW YORK n all of the talk about the Spring Contemporary art sales where many commentators focused on the 90% drop in Christie’s curated evening sale or the weakness in the Impressionist and Modern art market, not much has been said about the drop in sales volume for the three major houses Contemporary art day sales.
These sales are the live blood of the art trade where dealers, advisors and collectors buy stock, spot trends and the auction houses make the majority of their profit because the works in these sales aren’t as competed for. So here’s where an auction house will fatten its margin or just make its operating costs.
The big news of the weeks was that Sotheby’s day sale was down substantially to $54m. The New York Contemporary art day sale at Sotheby’s hasn’t been at that level since 2010. With such a striking pullback, what does the sale mean? And where did Christie’s and Phillips come out?
Instead of looking at historical charts of the sales, we have some detailed analysis of each sale from Lisa Prosser who is the data guru at Athena Art Finance. Prosser’s infographics show some very interesting details about each of the sales.
Take Sotheby’s, which saw the bigger drop, where the hammer price on the sale came in below the low estimate by 5%. That tells us demand was weak and estimates were too high. Nonetheless, only
Sotheby’s day sale was never going to reach the levels of previous years. Whether that is because Sotheby’s made a strategic decision to focus on greater visibility for its Evening sale lots or the lack of manpower from recent staff loses made it harder to shepherd a substantial day sale, hitting the high end of the estimate range would still have given Sotheby’s a shortfall from the previous year.
Sotheby’s also guaranteed seven of the day sale lots, an unusual practice borne out by the fact that three of those guaranteed lots sold below the low estimates. There was some good news in the day sale when a Calder mobile made a strong price almost twice the high estimate at $2.17m.
http://www.artmarketmonitor.com/2016/05/24/heres-the-not-so-good-news-from-the-may-cont-auctions-day-sales-were-down-too/
16% of the works were sold below the low estimates and a healthy 77% of the works found buyers. That suggests consignors were more than willing to stand their ground and try to get their minimum price privately.

3. NEW YORK - Sotheby’s bounces back with steady contemporary art sale
Auction exceeded expectations after disappointing results for Impressionist and Modern art on Monday
by Dan Duray  |  12 May 2016
Sotheby’s bounces back with steady contemporary art sale
Last night, Sotheby’s made up for Monday’s dismal Impressionist and Modern evening sale (where 21 of the 62 lots went unsold) with a solid contemporary art sale that saw just two of the 44 lots fail to find buyers for a hammer total of $209.6m, squarely within the estimates of $201.4m and $257.5m.
The sale’s total with premiums, $242.2m, was a far cry from last May’s total of $379.6m but these are different times. The evening saw no new records for artists and was led by a blue Cy Twombly blackboard work from 1968 that hammered for $32.5m with just one bid. The work carried no guarantee but seven of the other top ten lots did.
"There's still plenty of money out there," said the dealer Emmanuel Di Donna, formerly worldwide vice-chairman of Impressionist and Modern art at Sotheby's. "It's just a matter of a readjustment." The top lots, he said, were not as strong, but the house had managed to smooth that out with guarantees, and put together a good sale with middle market lots.
Matthew Paris of White Cube gallery, said that he too was impressed with the sale that Sotheby's had managed to put together in this market. "Both them and Christie's last night," he said, "really went to war for these lots."
One bright spot in a series of auctions that showed much reduced market activity was a seemingly-new Japanese buyer on the international art scene. Yusaku Maezawa, the billionaire founder of the online fashion mall Zozotown, who last night bought Adrian Ghenie's Self Portrait as Vincent van Gogh (2012) for $2.6m and Christopher Wool's Untitled (1990) for $13.9m. Maezawa also revealed that he was the buyer of Jean-Michel Basquiat's 1982 canvas that sold for the top price at Christie's on Tuesday evening for $57.3m, as well as of Richard Prince's Runaway Nurse (2007) for $9.7m, both artists' records at auction. Maezawa runs the Contemporary Art Foundation in Tokyo.
http://theartnewspaper.com/market/auctions/sotheby-s-bounces-back-with-steady-contemporary-art-sale/

4. NEW YORK Luxury Tower Inventory in Manhattan Grows, Cooling Once Red Hot Market
May 2, 2016 by Marion Maneker
The highest value end of the real estate market has been a good measure of health of the art market for some time. Does that mean recent reports of excess inventory among New York’s new developments is a sign of lowering demand?
The Real Deal has this observation about delayed sales for New York’s newest towers:
Despite off-the-charts construction activity in New York City’s residential sector, new development inventory plummeted a whopping 44 percent during the first quarter of 2016, according to a report from Douglas Elliman and appraisal firm Miller Samuel. According to the report, there were 753 new condos for sale at the start of 2016, compared with 1,345 units a year prior. By comparison, Manhattan’s overall inventory level inched 5 percent higher during the first quarter, with 5,506 properties for sale during that time. “Developers continued to either pull units from the market or were slow to replenish them in order to keep marketing [time frames] at lower levels,” wrote Miller Samuel President Jonathan Miller. “The pace of contract absorption remained well below years-ago levels, as the weak U.S. dollar and increasing competition reset demand to a lower level.”
Miller said new development inventory has dropped for three consecutive quarters. “That’s a tangible indication of when contract volume cooled off and when the market changed,” he said, adding that the cooldown coincided with a weakening U.S. dollar and more inventory in the high-end condo market (at least initially).

5. NEW YORK How Correlated Are Art Returns to Other Assets ?
April 28, 2016 by Marion Maneker
Deloitte SC 10 years
Buried in a US News story on art as an investment is some pretty astonishing stuff from Michael Moses of the Mei Moses Art Index which uses repeat sales to measure art asset values.
The assumption has always been that the the rise in art asset values during the overall economic slump of the global credit crisis was an anomaly. But Moses claims here that over the long term there is no correlation between art prices and financial asset prices:
The broad art market has provided compound annual returns of 5.7 percent in the last 30 years and 8.8 percent for the last 60 years, says Michael Moses, founder of consulting firm Beautiful Asset Advisors.
Better still, the index of broad art market prices is uncorrelated with those of other asset classes, such as stocks or bonds. “The stock markets went down in 2008 and our indexes were flat to a little up in 2008,” he says. The art indices “dropped substantially in 2009,” as the stock market rebounded. He pegs the long-term correlation at close to zero. That lack of correlation reduces overall volatility when art is part of a larger portfolio. The lower the volatility, the lower the risk. How much art should be in a portfolio? Moses says it depends on individual circumstances, but 10 to 20 percent is reasonable.
http://www.artmarketmonitor.com/2016/04/28/how-correlated-are-art-returns-to-other-assets/

6. Scott Reyburn moved up his normal publication schedule to offer a summation of last week’s sales. But the responses he got from market participants seem hard to parse. Take this from one art advisor who tells us that uncertainty isn’t the barrier to selling, it’s the lack of guarantees.
“The market has definitely shrunk,” said Wendy Cromwell, an art adviser in New York. “But that isn’t a result of sellers not wanting to sell in an uncertain market, but of a lack of spectacular guarantees” that flush out the best works. “There’s a cause and effect,” she added, explaining the absence of big-ticket works in last week’s auctions.
But guarantees only exist to removed risk—another term for uncertainty—from the sales equation. Reyburn and Cromwell don’t tell us what the real impediment is, if not uncertainty. Could it be that those who own art don’t need to sell at all? In other words, without a guarantee locking in a price too attractive to pass up, the sellers just aren’t selling. If that’s the case, it only further confirms that guarantees don’t inflate the market, they subsidize it.
Another head-scratcher is this comment on the Impressionist and Modern market that suggests all of the great works in that category sold during the last decade and a half have been donated to museums and will never return to the market:
“There just isn’t the quality left out there any more. All the great pictures are in museums,” said the London dealer Alan Hobart, who was at Christie’s Impressionist and modern evening sale on May 12 to see a square 1919 Monet, once part of a rectangular waterlily canvas, sell for $27 million, the top Impressionist price of the week.
A more likely scenario is that demand has narrowed. In 2007, there was broad demand for a variety of Impressionist and Modern works that were snapped up by emerging market buyers. Many of those buyers have had reversals of fortune and many others have migrated in their tastes. The Old Master and Impressionist markets seem to struggle not with quality, as we saw last year with three Modern works setting nine-figure prices, but with volume. The market structure gets truncated which seems to squelch demand. That in turn makes it difficult to attract supply to the market.
Finally, there’s been great deal of chatter in the art market suggesting the May sales would have been a shock to the system without the $100m in purchased by Yusaku Maezawa. But others point out most of his purchases had underbidders, sometimes more than one. So the sales might have happened just at a slightly lower level.
“They were lucky to get that Japanese client; otherwise, it could have been a different story,” said Judith Selkowitz, another adviser in New York. “But the fact is there’s still a lot of money around. Buyers are just a lot more selective. It’s good to rebalance, and it’s healthy that everything isn’t running away.”
Josh Baer was also quick to point out in his newsletter this week that Maezawa bridles at the depiction of himself as a neophyte shopper.
ART MUSEUMS

7. NEW YORK Scott Reyburn has a spot on column about the New York marquee sales this coming week which are markedly down in estimates and likely to show a dramatic contraction in the very top of the art market. Art advisors Reyburn spoke to rightly point to the diminished sales subsidies offered by the auction houses in the form of guarantees, direct or third party:
“A sea change has occurred at auction,” said Wendy Cromwell, an art adviser in New York. “The night sales are smaller, the estimates more conservative, the guarantees less exuberant, the great works fewer and far between.”
At the moment, Ms. Cromwell added, discretionary sellers will not part with masterworks “unless they are offered ridiculous sums of money.”
But Todd Levin gets right to the heart of the matter by pointing to Christie’s as the primary driver of the guarantee engine:
“The guarantees aren’t there anymore at the highest level,” said Todd Levin, another art adviser in New York. “Christie’s has stepped back, and the market is no longer on steroids and is returning to its normal state.”
The chart above shows the last New York Contemporary evening sale where Christie’s and Sotheby’s were neck-and-neck in the fight for market share.
Starting in 2013, Christie’s hit the afterburners by opening the guarantee book and pulling away significantly. Since this chart, Sotheby’s has caught up but the November 2014 sales were the peak of the guarantee-supported market:
Reyburn also has some color on Sotheby’s where Amy Cappellazzo offers her trademark quote grafting financial terms uneasily onto the art market:
“Our position on guarantees is to do them when we have calculated that it is a good financial opportunity for Sotheby’s, more like private equity decision,” said Amy Cappellazzo, chairman of Sotheby’s Global Fine Arts Division. “We feel confident about the deals that have been done for May, and expect to be pleased with the results.”
It’s not clear what Cappellazzo means by a private equity decision. But since private equity deals are levered (meaning their financing is mostly in the forms of loans) and guarantees are not loans but full equity positions (to continue with the financial lexicon,) the metaphor seems to falter. What Cappellazzo seems to want to get across is the simpler idea that they won’t offer guarantees where they don’t see a way to profit, which is quite sensible.
Finally, Todd Levin reminds us that Sotheby’s sale results are likely to reflect the recent staffing changes more than its market share:
“The brains trust has been depleted and it’s really affected their competitiveness,” Mr. Levin said. “Sotheby’s evening auction is about 10 lots short of what it should be.”
http://www.artmarketmonitor.com/2016/05/06/what-happened-to-the-top-of-the-auction-market/

8. NEW YORK
Foreign Buying in US Real Estate Drops By $10 Billion, Significant for Art Market?
July 7, 2016 by Marion Maneker
The Wall Street Journal has a story based on a new report from the National Association of Realtors that might give us a few clues about foreign spending in the US art market.
There’s no direct correlation between art and real estate or art and luxury real estate. But the two markets have had a tendency to trade in similar patterns. Anecdotally we know that there is a slowdown in buying in Manhattan and Miami at the very upper end of the range. There’s also been a big pull back in the art market above $10m.
Here the Journal gives a few clues, including the insight that Chinese buyers are again the big payers in the US market. Chinese account for 1/4 of the dollar volume sold to foreign buyers which was $27bn last year:
Purchases of U.S. residential real estate by foreigners who aren’t residents of the United States fell by $10 billion in the year ending March to $44 billion, the lowest level since 2013, according to a survey by the National Association of Realtors released Wednesday.
A strong U.S. dollar and weakening economies in Europe, South America and China along with rising U.S. home prices have hurt the purchasing power of foreign buyers. Tighter restrictions by the Chinese government on moving money out of the country also have made it more difficult for people there to buy U.S. homes. […]
While foreigners make up a tiny share of the U.S. housing market, they are critical to small, lucrative segments of the industry. Miami and Manhattan developers are relying on foreign buyers to help fill a swell of high-priced condos coming to market in the next couple of years. The high-end housing market in San Francisco and southern California also gets a significant boost from foreign purchasers.
http://www.artmarketmonitor.com/2016/07/07/foreign-buying-in-us-real-estate-drops-by-10-billion-significant-for-art-market/