The Art Newspaper
"Everyone is wondering if the downturn will be like 9/11"
By Brook S. Mason
February 13, 2008

New York dealers fear the worst

NEW YORK. US dealers are admitting to sluggish sales, hesitant clients and cancelled deals amid continuing financial market woes, which last month saw America’s largest bank, Citigroup, post a $9.8bn fourth-quarter loss.

“Nobody wants to say the sky is falling but perception affects every market and clearly, we are entering a new period in the economy,” said Martha Fleischman, president of Kennedy Galleries. “The people who see art as part of their portfolio and like to flip will get an education very quickly this year,” she added.

“There are more dealers hanging on by their fingernails but no-one will go on the record,” said a prominent art world public relations expert who did not want to be named. “Everyone is wondering if the downturn will be just like 9/11,” she added.

One of the art market’s noted analysts, William Goetzmann, of Yale School of Management, said the picture is mixed: “What we are seeing are the natural effects of economic concerns among the middle class and a shift away from non-essential, luxury goods, even as the demand at the high end of the wealth spectrum for art appears strong for now.” He sees sales of emerging artists’ work as having a speculative component, which “is sustained by the appearance that there is a market for them”. “However, if galleries close and the market for emerging artists retrenches, it is harder for buyers to believe in a future market for what they have bought,” he added.

Dr Goetzmann argued this new market shift may spill over and affect more established artists. “Even for works that are not purchased for speculative reasons, we should see a drop in price based on lower income levels among the customers for these works,” he said.

So far the only shift dealers are reporting is in the middle market. “In the past six months, clients are no longer willing to take a chance on younger artists priced at $15,000 to $20,000,” said David Maupin of the Lehmann Maupin gallery with both Chelsea and Lower East Side premises. He reported a 50% drop in sales in that category over the past six months with buyers focusing instead on higher priced works by established artists like Tracey Emin who have had museum exhibitions. “I have far more people I can call for a $75,000 to $100,000 work than the lower-priced artists,” said Mr Maupin.

“Six months ago, everyone talked of expanding but now merging is the topic,” said Michel Allen, 36, who opened Allen Gallery in Chelsea in December 2006. Her clients include Russian corporations, major financial firms such as Gruss & Company and trendy designers such as Celerie Kemble. “Lately, other dealers have approached me about merging,” she said. She has seen her sales decrease 10% in the second half of last year with photography particularly affected.

But although her rent doubled this summer, she has turned down offers of partnerships to share costs. “I’m still up compared to last January’s sales,” she explained, but said this has required considerable efforts. “I’m working 24/7, I’ve accepted more speaking engagements than before and have been giving more collector walks in Chelsea while going out to many events.”

The antiques market also appears particularly hard hit. “The middle market is virtually at a standstill,’ said English and continental antiques dealer Clinton Howell. “The interesting thing is that a certain segment of the market that used to be able to buy things has been left behind and thinks that top end dealers are too expensive.”

Even so, some say the market at the top remains healthy. “So far the Citigroup losses and the mortgage crisis, which began in the summer, have had no impact on my own collectors,” said Linda Hyman, American paintings dealer. “But the younger collector, especially those taking on contemporary art, is more tuned into the daily vibrations of the market.”

Ann Freedman, Knoedler & Company president, said its Olitski exhibition this winter was sold out. “Many of the paintings could have been sold many times, illustrating the depth of the market for serious work,” she said.