May 2015 Auctions: Has The Art Market Gone Crazy?

Sebastien Laboreau

The 2015 spring auction season in New York City generated sales of more than 2.7 billion dollars in less than two weeks. But this historic event could be replicated soon since the art market is expected to continue its growth in the coming years.

With over $2.7 billion worth of artworks sold in less than two weeks in NYC in May 2015, this auction season is the highest ever recorded in all auction history, spanning Impressionist, Modern, Post-War and Contemporary art. The figures are stunning; but even more remarkably, the art market is showing no sign of weakness despite an impressive growth for the past few years, driven by increased globalization, and the entrance of new buyers more particularly from Asia.

Pablo Picasso. Les Femmes d’Alger, 1955. Sold at Christie’s for $180 million

This Auction Season in Key Figures

In terms of periods, Post-War, and Contemporary Art are clearly taking a strong lead with revenues just short of $1.6 billion, the highest total ever achieved in an auction season. However, this represents only a slight increase as compared to past seasons, $1.5 billion in November 2014. Impressionist and Modern art, with over $1.2 billion, are reaching their highest level yet as well, with an impressive growth (from $700 million in November 2014) driven by numerous records at the highest level.

CHRISTIE’S $ 741,538,625 $ 984,480,750 $ 1,726,019,375
SOTHEBY’S $ 420,419,250 $ 472,486,775 $ 892,906,025
PHILLIPS $ 112,075,500 $ 112,075,500
TOTALS $ 1,161,957,875 $ 1,569,043,025 $ 2,731,000,900

Christie’s emerged as the clear winner for this auction season with a whopping $1.7 billion, reaching a new and unprecedented benchmark in auction history during a single week. Christie’s indeed created auction history by combining—for the first time—both categories in a single week, with a leading curated sale entitled Looking Forward to the Past, which presented works from both categories. This “super-charged” sale achieved over $700 million and broke numerous records: 35 lots, all but one sold, all above estimates; 48 minutes for a total revenue of over $700 million, and new world auction record for any work of art, with Picasso’s Femmes d’Alger, sold for $180 million including 40 bids above $100 million.

The new record set by the Picasso marks a dramatic $37 million increase from the previous record of $142 million for Francis Bacon‘s triptych Three Studies of Lucian Freud in November 2013, also at Christie’s.

To give some perspective, in the early 2000’s, a typical two-week spring or fall New York auction season, including both the Impressionist and Modern Art as well as Post-War and Contemporary Art categories, would typically reach $300 million to $500 million. Now Christie’s and Sotheby’s alone can generate that much, and more, in a single evening sale in New York City. The next benchmark will be $1 billion achieved in a single sale.

What is the reality hidden behind these figures?

First, these record figures are driven by the high-end market, with a record 288 lots sold over $1 million, and no less than 29 lots over $20 million. With over $800 million in total value, the top ten artworks represent more than 30% of the total amount sold, confirming the importance of “trophy artworks” for which there is no limitation in value anymore. Still most of the sales, including the day sales, ranged between $100-500K. These numbers also confirm the dominant position of the Impressionist and Modern art segment at the highest level, generating 70% in value of the top 10 lots.

1 Pablo Picasso Les Femmes d’Alger $ 179,365,000 CHRISTIE’S
2 Alberto Giacometti L’Homme au doigt $ 141,285,000 CHRISTIE’S
3 Mark Rothko Number 10 $ 81,925,000 CHRISTIE’S
4 Pablo Picasso Buste de Femme $ 67,365,000 CHRISTIE’S
5 Vincent van Gogh L’Allee des Alycamps $ 66,330,00 SOTHEBY’S
6 Lucian Freud Benefits Supervisor Resting $ 56,165,000 CHRISTIE’S
7 Andy Warhol Colored Mona Lisa $ 56,165,000 CHRISTIE’S
8 Claude Monet Nympheas $ 54,010,000 SOTHEBY’S
9 Piet Mondrian Composition N. III $ 50,565,000 CHRISTIE’S
10 Francis Bacon Portrait of Henrietta Moraes $ 47,765,000 CHRISTIE’S

Second, the art market is more global than ever with registered bidders from 48 countries, a record at auction, with a clear bias towards Asia and the Middle-East. Even though buyers at auction usually stay anonymous, this year, some Middle Eastern and Asian buyers revealed their identities. The record winning Picasso is now the property of Qatar’s Al Thani family. Vincent van Gogh’s L’Alleee des Alyscamps sold for $63 million to a Chinese collector. Picasso’s Femme au chignon dans un fauteuil sold for $30 million to Chinese media mogul Wang Zhongjun, among others. It seems clear through the observed bidding activity from the phones during auctions that Asia is leading the pack, Sotheby’s has released that Asia contributed more than 30% of the evening auctions total. However, Western collectors are still very active, Hedge fund mogul Steve Cohen was revealed as the buyer of the record-breaking Giacometti‘s L’homme au doigt, sold for $141 million. Last fall, he also purchased Giacometti’s Chariot for just over $100 million.

Third, the sell-through rates remain very solid, on average 15% for the evening sales. In total, out of 2,101 lots offered, 1,645 sold for a total sell-through rate of over 78%, which is within industry average. Whereas the number of lots appears more or less stable as compared to recent years, average prices are increasing, showing the market is driven by a higher global demand. Day sales are also demonstrating increased bidding competition.

Fourth, one can observe the gradual dominance of Christie’s in the global art market which, up to two years ago, was a more balanced battle with Sotheby’s. We think that could be attributed to their now solidly divergent strategies regarding guarantees, a strategy aimed at securing top-level consignments. Sotheby’s reportedly guaranteed only one quarter of the number of lots (16) while Christie’s guaranteed (64). Some have suggested that the aggressive nature of these guarantees could artificially increase sale totals in order to convince motivated collectors to sell.

Certainly not all of them, interestingly, Giacometti‘s breaking-record sculpture was one of the few star lots that did not have any auction guarantee. Christie’s confirmed they had extended a guarantee that was declined by the seller, who indicated that he would take it back if it failed to find a buyer at the auction.

Is The Art Market over-heating?

The art market has demonstrated a sustained growth for the past 5 years, with auction houses breaking records year after year, and constantly reaching new benchmarks. Some have already warned of potential over-heating of the art market driven by irrationality and the availability of huge liquidity in the financial markets that needs to be invested.

To that extent, the new CEO of Sotheby’s, in a recent interview, described his target market by referencing a report highlighting there were over 170,000 people around the world with a net wealth over $30 million, with a total wealth estimated at $21 trillion, and with a predicted growth of 34% within the next 10 years. This certainly indicates the art market is not over-heating anytime soon.

Alberto Giacometti. L’Homme au doigt. Sold at Christie’s for $141 million

In fact, we believe the art market will continue to grow strongly over the next years, driven by remarkable macro-economic factors

Increase in number and in wealth among High Net Worth Individuals (HNWI) and Ultra High Net Worth Individuals (UHNWI)
Increased interest of HNWI and UHNWI in art as an investment asset in terms of wealth protection and diversification
Increased globalization, with easy access to buyers from all around the world, and most of those buyers willing to acquire the same artists and artworks
Demonstrated returns and downside protection over the medium-term for the most important artists
Sustained imbalance between the offer of good quality artworks from deceased artists and increased global demand
Increased global urbanization and museum construction all over the world

To illustrate the importance of the latter, Miami is a great example of how impactful Art can be to a vibrant community. It is estimated that Art Basel Miami Beach injects over $500 million yearly to the local economy. The hospitality business is thriving; Miami has one of the highest occupancy rates in the world, ranking in the top 5 list among Top 25 hotel market in the United States, with room rates increasing 44% over the past 10 years–as reported by the Greater Miami Convention & Visitors Bureau. It is clear that the Fair has also had a positive impacted on the multi-billion dollar real estate business in the area, attracting the best architects in the world, and contributing to the revival of entire neighborhoods.

The increased activity at auction is also mirrored by the frenzy demonstrated in the main art fairs all over the world, where seasoned collectors are no longer shy to purchase at all the levels, with increased frequentation and in the number of transactions.

Maybe because the art market is the perfect way to combine the pleasure of owning meaningful artworks, with the potential of investing wisely one’s wealth, the art market will continue to grow and endure in the coming years, We expect more record sales and predict more museums opening and more art will be shared around in vibrant communities globally.

© | 2019