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Art Market Back on Solid Ground

Despite continued uncertainty surrounding the health of the broader economy, the recovery of the international art market appears to be on solid footing, according to recent reports from art dealers and officials of major auction houses.

NEW YORK—Despite continued uncertainty surrounding the health of the broader economy, the recovery of the international art market appears to be on solid footing, according to recent reports from art dealers and officials of major auction houses. Experts and analysts expect art sales to continue to surge in the coming months.

New York auctions last spring showed a sharp rebound in the market for Impressionist, modern and contemporary art. Overall volume at Christie’s, Sotheby’s and Phillips de Pury & Company in May totaled $1.2billion, roughly triple the $421million total of the previous spring’s series of auctions, which had the lowest sale volume in seven years.

Last month, credit rating agency Moody’s Investors Service upgraded its rating on Sotheby’s, citing a rebound in the international art market. The agency said it expects the auction house will “maintain enough liquidity and financial flexibility at its current rating to weather future cyclical downturns and temporary declines in operating performance.”

Following the release of a better-than-expected ­second-quarter earnings report from Sotheby’s on August 5, equity analyst Rommel Dionisio of investment bank Wedbush reiterated his “outperform” rating on Sotheby’s stock and raised its 12-month price target to $40 from $38. The company reported second-quarter revenue of $281million, or $1.26 per share, exceeding the consensus forecast of $242million, or $1.07 per share. Dionisio also noted improved auction commission margins and better cost controls at the international auction house. As ARTnews­letter was published, shares were trading at around $30 on the New York Stock Exchange, having risen from around $22 in early July.

“With clearly rebounding momentum in the global art market, we believe shares should continue moving upward as such recovery in the art market progresses,” Dionisio wrote in his research report. “The art market is only in the early stages of a potential multi-year rally.”

Sotheby’s CEO Bill Ruprecht said that the stronger-than-expected results are “indicative of the improving art market we have been experiencing since last autumn.” He acknowledged, however, that “the global economy remains uncertain,” adding that the challenge for the company continues to be “to find the right balance in presenting great works, fresh to the market and attractively estimated.” He added that house officials are “encouraged by the level and quality of our consignments we have gathered thus far for our sales worldwide.”

An early test of the ­contemporary-art market will come later this month, when Sotheby’s offers selected works from the collections of financial firms Neuberger Berman and Lehman Brothers. Estimated to bring a total in excess of $10million, the auction will feature works by such contemporary artists as Andreas Gursky, Damien Hirst, Yoshitomo Nara, Richard Prince, Cindy Sher­man and Piotr Uklanski.

Meanwhile, on Sept. 22 Christie’s will hold its “First Open” sale, which will feature cutting-edge contemporary works by such artists as Jean-Michel Basquiat, David Hockney, Donald Judd, Yayoi Kusama, Frank Stella, Thomas Struth, John Wesley and Lisa Yuskavage. Auction house officials estimate the sale will fetch a total of upwards of $5million.

Since Christie’s is privately held, the company is not required to disclose detailed quarterly financial results, but early last month the auction house released its overall six-month sales figures. Christie’s reported worldwide sales of £1.7billion ($2.57billion) for the first half of this year. Last year, amid the decline of the art market, the house reported comparable half-year results of £1.2billion ($1.8billion).

Christie’s said this year’s first-half results include private sales of £182.7million ($274million), a 37 percent increase over its total private sales of last year. Interestingly, the house said that despite a lower total sale volume last year, it sold more lots for $1million or more—201 lots in the first half of last year, compared with 169 in the first six months of this year.

Galleries Note New Focus on the Middle Market

“I would say the broader market has recovered quite nicely and you have record prices at auctions. You don’t have record prices as much in the gallery, but there is more business occurring in general,” New York dealer Hollis Taggart, who specializes in 19th- and ­20th-century American art, told ARTnewsletter.

Taggart told ARTnewsletter that another—somewhat unexpected—outcome of the downturn for several galleries has been a focus on or rediscovery of “second- and third-tier artists,” in addition to the star artists whose works held their value or even set auction records during the economic downturn. Having extended a recent show of work by Theodore Stamos at his gallery three times, Taggart reported the sales of six works on paper and ten oil paintings, mostly from the early 1940s, as well as some works from the ’50s and ’60s. Prices ranged from about $22,000 for the works on paper up to $325,000 for the most expensive oils in the exhibition.

Michael Hackett, a partner in Hackett Mill Gallery, San Francisco, noted widespread interest in the gallery’s show of work by second-generation Abstract Expressionist painter Jules Olitski. “Embracing Circles,” featuring acrylic paintings and sculpture by the artist from the 1960s, will be on view through Oct. 1.

“His career has been established for six decades, but our exhibit has sparked a renewed interest,” Hackett told ARTnewsletter. “The paintings are finding an audience from coast to coast as well as in Europe. I would say collectors are looking for opportunities in works that are still a very good value when you consider the importance of the artist.”

To date, five of the eight works in the show have been sold, with larger works priced at $225,000/275,000 and smaller work priced at $125,000/175,000.

Outlook ‘Cautious But Optimistic’

Like many other experts, Christie’s CEO Edward Dolman noted the difficulty of persuading collectors to sell last year. “In 2009, the challenge of supply contrasted with buyer demand, leading to consistent, high sold rates,” he said. “In 2010 this has led to increased vendor confidence and at the higher end of the marketplace we have seen a number of key sales setting new price levels.” Dolman said that “global confidence in the art market has been evident throughout the first half of 2010 and we expect it to continue with our autumn sales.” In May Christie’s set a world record for the most expensive painting sold at auction, when Pablo Picasso’s Nude, Green Leaves and Bust, 1932, offered from a private Los Angeles collection, sold for $106.5million.

Dolman said the house’s improved sales figures “reflect the growing role of Asia in the marketplace.” Sales in Hong Kong for the first half of this year were $300.7million, more than double the $129.4million reported for the first half of 2009. Dubai sales for the first half of this year were reported at $23million, compared with $9.1million in the first six months of 2009.

Dolman described the outlook for the second half of the year as “cautious but optimistic. We continue to see strength and depth in both vendor confidence and buyer activity despite the broader economic context.”

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