Art Collection Industry Booming
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In spite of the real estate recession and record-setting energy prices, the art collection market is still partying like it’s 1999. Every shattered record, though, recalls the specter of 1989, when a cooling economy overwhelmed the hot contemporary-art market like a nuclear winter.
A-list artists such as Koons saw their prices plunge, but the hardest hit were small-business owners specializing in contemporary art. In New York City alone, more than 70 galleries folded. Knowledgeable art dealers aren’t waiting around to see if the crash will finally come in May, during the Sotheby’s and Christie’s International annual spring sales of postwar and contemporary art.
Those entrepreneurs are turning to new markets and applying lessons learned in the last downturn to ensure that they’re nimble enough to succeed in either a continued boom or a bust. Burned by that experience, they are now more selective about what they stocks, and won’t deal in works by artists who are are overproducing.
Specializing in lesser-known and regional artists is one strategy as their prices are more stable than top-tier names. Some continue to represent elite names, but manages volatility by boosting prices no more than 10% or so between shows, no matter how an artist fares at auction.
It’s a strategy that worked. When the market was rising, some collectors complained that prices were too cheap and devalued their investments. But when the cycle turned, none of the work was marked down, thus maintaining the prestige and perceived value.
Broadening customer base by focusing on the international market. In the late ’80s high-end art buyers came from the U.S. and Japan; when those economies simultaneously tanked, the art market followed. Now China, the Middle East, and Russia also field wealthy collectors, all of whom are enjoying the effects of a weak U.S. dollar.
Art fairs are another new bright spot, because they bring in new clients and high-volume sales. The main thing is to understand there is a limit to how long people will pay attention. There may be a very nice revenue stream while it lasted. The trick is to know when to move on to the next one.
