Mom & Popped: In a Market Contraction, the Middle-Class Gallery is Getting Squeezed

Steven Stewart opened his gallery in 2011 in Tribeca and called it Kansas, a reference to his home state. He built a collector base, a following. In 2015 he moved across town to the Lower East Side to be in the thick of a district some see as New York’s most vital: a place where art dealers can focus on a single storefront venue, not on world domination, and survive by selling work by exciting artists that Chelsea mega galleries haven’t stolen yet. Kansas Gallery was a mom-and-pop space.

After one year on Rivington Street, Stewart announced he was closing the gallery. The email was simple. It was just a picture of Barack Obama waving goodbye.

“I’m not sick, I’m not broke, I’m just over it—you know, you can do that,” said Stewart, who is in his late thirties and sports a short scruffy beard, a few days later at a restaurant in Tribeca. He was drinking Chardonnay. It was 2:00 p.m. The wound was still a little fresh.

“What I never wanted was to be one of these life-support galleries that are operating on massive deficits, owing God and her husband money, and just can’t hit the off switch because of ego or hubris,” he told me.

He was speaking calmly, though with an animus. Kansas was part of what has been described to me by dealers as the art world’s “middle class”: single-venue operations that fight to get by month-to-month, facing a market contraction at a time when the globe-conquering mega galleries, which have become corporatized behemoths, can stay afloat while others fail.

And without any kind of safety net, the question of failure starts to look more like a when than an if.

“There are galleries that think they’re too embedded in the world, where they have no other option [than to keep going],” Stewart added. “These zombie-like institutions that are propagating bad ideas. I know that goes on. Just stick a fork in me. I’m done.”

Though the strata can be a little fluid, there is a hierarchy in New York’s gallery landscape, a class system developed over decades of the art scene’s nomadic shifting of neighborhoods. There are emerging galleries, storefronts or second-floor spaces in Chinatown run by small clusters of artists or dealers with day jobs at bigger shops. They are, in this scenario, the lower middle class, though upward mobility can be swift—witness the rise, for example, of 47 Canal, just five years ago an artist-run space above a janky jewelry store, now home to a Hugo Boss Prize winner. Overhead is low; they can sometimes make rent with a single sale. Ellie Rines, who runs 56 Henry out of a shoebox of a space on the eponymous street, tells me she pays her artists via Venmo, a money transfer application (upper limit for a single payment: $3,000) on her iPhone.

At the other end of the spectrum are the cathedrals of west Chelsea, the outposts of the world’s leading mega galleries: Gagosian, David Zwirner, Hauser & Wirth, Pace. Expansion at this level is relentless: In 2017 Zwirner will open in Hong Kong, their fourth gallery worldwide, while Pace builds an eight-story behemoth on West 25th Street, adding to their eight locations around the globe. The huge new Hauser & Wirth space opens on West 22nd in 2018, and that will put them at six outposts. And then there are dealers who may not have outposts in Hong Kong or Rome or San Francisco—where Gagosian opened its 16th space in April—but who purchased their buildings in Chelsea before the High Line elevated park made the real estate some of the world’s priciest, thus securing their place in the upper class for good. Paula Cooper and Barbara Gladstone are certainly the upper class, in the blue chip for life.

So where does that leave the middle class, those galleries in Chelsea and on the Lower East Side that have been around long enough to be somewhat established, but still have to sell enough to make rent? Now, they have to deal with a perfect storm of gallery-killing factors: a market cooling from top to bottom, plummeting prices for onetime hit artists who minted money for mid-tier galleries just two years ago, the chokehold of fair booth prices, skyrocketing rents in neighborhoods where buying a building is unthinkable.

In the last year, galleries such as Kansas, Lisa Cooley, and Laurel Gitlen have closed; Room East dropped its artist roster and began putting up occasional historical shows; Feuer/Mesler and Team galleries closed secondary spaces when the landlord hiked the rent; and Anton Kern and Martos were forced to move from Chelsea.

And, throughout, the Chelsea major leaguers have been cherry-picking the burgeoning stars from the LES farm teams right before they might actually have made their loyal original dealer some real scratch. Artist Joe Bradley, late of Canada gallery (and, briefly, Gavin Brown’s Enterprise) is now showing at Gagosian—the Yankees, to complete the baseball metaphor. And in September, Sam Moyer blindsided her longtime dealer, Rachel Uffner, by announcing she was leaving for Sean Kelly, the large, established north Chelsea gallery.

“The conglomerate gallery model—there’s no doubt it’s going to annihilate a lot of mom and pops,” said James Fuentes, who has his eponymous shop on Delancey Street, and grew up in the area. “That’s just the reality of it.”

Another witness to the rise of the mega gallery is Stefania Bortolami. She opened at 510 West 25th Street in Chelsea in 2005 with fellow dealer Amalia Dayan, in a building owned by Dayan’s husband, collector Adam Lindemann. The founder of Venus Over Manhattan gallery on the Upper East Side, Lindemann sold the 25th Street building to one of the megas, Pace, in 2009. Bortolami Dayan was a single-location venue in the midst of the flags planted by much bigger competitors; both partners knew the competition quite well—they had worked at Gagosian before opening their own shop.

After a split from Dayan and a move to West 20th Street, Bortolami is now at a crossroads, unclear where she fits in a Chelsea that’s become increasingly controlled by a few power dealers. Rather than aiming to beat them, Bortolami is just trying to survive.

“There’s this mega gallery, commerce-based expansion going on, and I’ll never be able to compete with this… let me call it the ‘Alpha male, let’s turn it into a doughnut factory’ thing,” she said, sitting in an office in the back of her gallery space. “Because that’s not me, that’s not my nature. I hope we can survive, because we provide a service that the mega galleries have proven over and over again that they cannot, which is nurturing young artists.”

If the young artists keep leaving the middle-class galleries for the big ones, though, the ecosystem breaks down.

“Young artist plus huge space equals disaster,” Bortolami said. “I don’t know why they do it. It’s the definition of crazy.”

Before the financial crisis slowed everything down in 2008, the gallery system in New York was in pretty good shape. Chelsea was the world’s most important gallery neighborhood in an art market that had not yet become fully globalized, and the opening of the New Museum in 2007 catalyzed the burgeoning Lower East Side circuit, where newer dealers could get space on the cheap. For the first time since the East Village art scene, the ’80s alternative to SoHo, collapsed due to its own bloat, there was finally an alternative gallery cluster where emerging spaces could band together against the machine of Chelsea.

The recession put an end to all that goodwill.

“Before 2008 it felt like there was real consistency in our sales,” said Andrea Smith Zieher, who co-owns ZieherSmith in Chelsea with her husband, Scott Zieher. “The faucet turned off completely in 2008—it was terrible, it was months when nothing happened, no sales. And ever since then, it’s always been unpredictable—like, you never know when you’ll have a bad month.”

To weather the storm, the galleries tried to band together instead of going it alone.

“One of the first people to call me when the shit hit the fan in 2008 was Pascal Spengemann,” said Fuentes, referring to the current Marlborough Chelsea director who at the time of that call had a gallery in Chelsea, Taxter & Spengemann, that subsequently moved to a space with little foot traffic in the East Village. “He was like, ‘James, how are you guys doing?’ At the time, I paid $1,000 a month rent, I was fine, and he was like, ‘if you want to discuss it, maybe we could join galleries to ride this out.’ I fucking appreciated that call so much. I feel like somebody had my back.”

Fuentes survived the recession by working on a shoestring budget for a while, but others were not so lucky—Taxter & Spengemann, for one, closed in 2011, after moving back to Chelsea from the East Village.

The art market managed to bounce back in the years following the recession, and by 2013, things seemed to have rebounded—auction sales were shattering records (witness Jeff Koons’ Balloon Dog (Orange) selling for $58.2 million that November at Christie’s, setting a new record for a living artist), mega galleries continued their worldwide expansion, and the global fair circuit became a hajj for major dealers and collectors. And a brief explosion in prices for a few young artists—Lucien Smith, Parker Ito, generally young artists who conformed to a muted style of abstraction dubbed “zombie formalism” by painter and writer Walter Robinson—had sparked a gold rush for similar product, a mania that propped up some of the small galleries that went along for the ride, only to leave them struggling when the bubble burst in 2016.

“This market came on so strong—[the collectors] turned these middle-class galleries into money-making machines, and that’s gone now,” says Joel Mesler, who runs Feuer/Mesler on Grand Street with fellow dealer Zach Feuer.

We were sitting on a particularly gentrified stretch of Orchard Street, just a few blocks from the gallery space he was forced to leave last year due to an astronomical rent increase. We were drinking coffee from a shop that roasts beans from around the world in-house, using something called a Javabot.

About a year ago, as the market in general began to cool (total sales from the three major auction houses during November 2015 was down 14 percent compared with May 2015), the collectors who had purchased gobs of work from a few of the small storefront galleries on the Lower East Side with the intention to flip on the secondary market disappeared. This was the practice that caused a buying frenzy, with shows selling out before they opened and wait-lists of collectors wanting more. Works by painter Kour Pour, for instance, were on sale at Mesler’s former gallery, Untitled, in February 2014 for $15,000; the following September, a similar painting netted $118,750 at Phillips. In September 2012, Los Angeles gallery OHWOW featured works from Lucien Smith’s “Rain Paintings” series priced at $3,000 to $12,000; one piece from that series sold at Sotheby’s London in February 2014 for $372,000.

As the market chilled, demand slowed and buying stopped, leaving dealers to suffer—a condition driven by the search for an opportunity, not a devotion to artist or artwork, Stewart explained. He recalled an interaction in May 2015—the period between boom and bust—with a collector who came into the gallery: He nearly bought an abstract painting by a young artist, before balking. “I’ve realized that all of my collection looks the same,” he said. He mused about how he might get into figurative portraiture.

“The root of this thing we’re dancing around terminates with a new collecting community that’s doing this for sport,” Stewart said. “It becomes a sort of a baseball card game of, like, cheap connoisseurship. Like playground connoisseurship. Like, ‘Got it, got it, got it, need it, got it.’ There’re a lot of people anointing talent who really don’t know what the fuck they’re doing.”

Stewart took a gulp of Chardonnay.

“I do think those people are culpable,” he went on, “and I don’t mean it in a condescending or disparaging way. The enthusiasm among new collectors is really fucking cool. But their scholarship is misplaced—or not there. So the market is determined by people who have no business being here.”

The cracks in that market were on full display at the Phillips New Now auction in New York this past September. The day before the sale, collector Niels Kantor revealed to Bloomberg reporter Katya Kazakina that he was unloading a work by young abstract painter Hugh Scott-Douglas in a fit of desperation. After buying the piece in 2014 for $100,000 with the intention of flipping it for a quick buck, Kantor saw the market for such emerging artists collapse—a “correction,” as many critics called it who watched the bubble rise with horror.

And so a painting purchased for $100,000 to be flipped for perhaps three times that, was offered at auction with a low estimate of $18,000.

“I’d rather take a loss,” Kantor told Kazakina. “I feel like it can go to zero. It’s like a stock that crashed.”

The work would have to sell for a respectable figure in order to save Scott-Douglas’s nascent career—no easy feat in a sale that, due to lack of a reserve on some lots, saw works with $6,000 low estimates go for just $563, the price of a power lunch with wine.

When the Scott-Douglas came up, Matt Bangser, a partner at Blum & Poe—the gallery that represents Scott-Douglas—began bidding from the back of the room. The only other phone bidder was on the telephone with Phillips specialist Sam Mansour, and after some back-and-forth, that bidder purchased the work for $30,000, more than the high estimate, and more than the $25,000 asked when it was shown at Blum & Poe in 2015.

“Niels Kantor, the way he’s going off on Hugh Scott-Douglas—so wack, so unacceptable,” said Fuentes.

We were drinking tea at the coffee shop next door to James Fuentes Gallery, which had up a show of work by McDermott & McGough. Our seats afforded a view of the intersection of Allen and Delancey, where brick tenements still bore 100-year-old signs for bygone spectacles shops and shoe salesmen and food markets. Fuentes introduced himself to the barista as a small-business owner in the neighborhood.

“It doesn’t help anyone,” he went on, referring to Kantor. “It’s like yelling fire in a crowded room. It’s bad. It’s bad, bad, bad, bad, bad.”

The correction in the market has lingered over the last year, prompting real-estate brokers to lower rents in Chelsea and on the Lower East Side. Late last year, the average taken price for a ground-floor space in Chelsea was $125 per square foot, said Earl Bateman, a broker at Rice & Associates who specializes in leasing in arts districts; his website carries testimonials from many a small-gallery owner. After landlords failed to attract tenants at those prices amid a faltering art market, the average taken price fell to $120 per square foot.

But on the Lower East Side, Bateman explained, stubborn independent landlords can sometimes afford to keep rents high even if there are no takers, which has resulted in the once bustling gallery row now pockmarked by empty storefronts displaying For Lease signs.

Unprompted, Bateman brought up by way of example 30 Orchard Street, formerly Mesler’s gallery Untitled, and then half of the brief two-space era of Feuer/Mesler.

“It’s held by a landlord with deeper pockets so there’s no need for him to give it away,” Bateman told me over the phone. “They don’t care who takes it, they don’t care if it’s a gallery or not.”

It’s this shakedown that’s caused galleries to close as rents go higher than they, or anyone else, can pay.

“We decided to tell the landlord to fuck off, and we walked,” Mesler told me in November 2015, on the phone, when he announced the closure of the Orchard Street space. “They wanted to add some things into the lease that we were not comfortable with and did not want to give in to. It’s another real-estate game. They had someone who could give them more for the space.”

But a year later, the space was still vacant. A listing on the web indicates they are asking $20,000 per month, or $131 per square foot, which Bateman told me was about average for a space on Orchard between Delancey and Canal Streets. (Though, a few blocks deeper, in the area now being branded Two Bridges—where you find Foxy Production, Essex Flowers, and Rines’ 56 Henry—the rent is much cheaper, as little as $60 per square foot on average.)

It’s on Orchard Street below Delancey where the vice has tightened. It was once home to Untitled, Joe Sheftel, Rachel Uffner, and many others, but it now houses primarily chic eateries in storefronts that were, a generation ago, occupied by Jewish clothiers.

Even galleries that have managed to hang on to the same space for years and years have reason to worry. Phil Grauer, whose gallery Canada has been in just two Lower East Side spaces in its 17 years, has nurtured some of today’s biggest art stars; Canada garnered a full profile last year in the pages of W. Nevertheless, he told me his prime directive is: “What can we do to survive, so we can live another day?”

“We could go away this month,” Grauer said. We were sitting in Café Henrie, a place owned by fashion-world graffitist André Saraiva, with grain bowls on the menu and aspiring models behind the counter. “If there’s some weird Brexit thing at [London art fair] Frieze, then we go to [Paris art fair] FIAC and meet up with a frozen economy or a disgruntled terrorist, you lose two fairs, and there’s a downward spiral. And then it’s early retirement.”

I asked whether he could actually see this early retirement happening.

“My dream come true,” he said.

Many of the dealers I talked to discussed the perils of staying on top of lease negotiations. Fuentes has eight years left on his lease, after which he could renew, though he also toyed with the idea of moving to, say, the Upper East Side. Before settling on Delancey Street, he looked at a space in the same building as veteran gallerist Marian Goodman, on a sleepy stretch of the once dominant 57th Street. He could partner with a few like-minded galleries and buy a building in the Bronx.

Team Gallery owner José Freire—who, as it happens, checked out that same 57th Street space at one point—saw his lease expire on his second space, on Wooster Street in SoHo, this past April; when it did, the landlord doubled the rent, to $50,000 per month. Freire decided to close the space, and it now houses a boutique for the Italian shoe company Buscemi.

“Well, business is down,” Freire told me. “Day and date over last year, my business is down.”

We were sitting in a basement showroom of Team’s gallery on Grand Street, where neighbors such as the Acne clothing store and an Alexander Wang boutique operate in the ground-floor spaces of cast-iron former factories. It’s now his only space in New York, and for a time, it was open six days a week to accommodate SoHo Sunday foot traffic. Now that Artists Space and Swiss Institute have left the neighborhood, fleeing high rents, Freire decided to close on Sundays. Team, which turned 20 this year, also maintains two very small spaces that Freire calls “starter galleries” in the Venice Beach area of Los Angeles.

“It wasn’t until April that I asked my bookkeeper, and that’s when she told me—we were down 20 percent,” he went on. “Needless to say, if a gallery goes down 20 percent, or 40 percent, in sales, what do you do? You have to cut expenditures. I happily run a gallery that actually has some bloat. That lease ran out April 30, and that’s $50,000 a month that we’re not paying. And I’m not paying the $8,000 a month to heat it in the winter. That place was an icebox.”

It’s not news that rent in New York is high, but it’s frustrating for neighborhood lifers to see their initial efforts spur the retail and condo-fication that eventually kicks them out. It happened in the ’90s to the first wave of SoHo galleries, who mostly moved to Chelsea. Another example of this is the sweeping sterilization of the East Village inadvertently caused by that neighborhood’s brief gallery boom in the 1980s—or, as Gary Indiana once described it in New York magazine, “an insignificant hiccup in the long burp of art history that created a seismic shift in the history of New York property values.”

“What’s your rent? How long is your lease? It’s a real-estate problem a lot of the time,” said Grauer. Canada now operates a large space on the cobblestoned slip of Broome between Chrystie Street and the Bowery. He says he has about five years left on his lease, and he has no idea if he’ll be able to afford it if it gets jacked up.

“Your lease, that’s your horizon,” Grauer continued. “The area’s under incredible pressure. In 1999, it was wide open. We got to sense the coming changes, and witness them firsthand.”

With his plans up in the air, Stewart said he wouldn’t rule out opening another gallery space, though he admits there just aren’t many areas left to explore. “If the art world follows the blind spots of real estate in New York, it could work, but I don’t know if there are other blind spots on this small plot of land,” he said. “Gavin [Brown] is up in Harlem, but he could set up shop on the fucking moon and do well.”

I asked him where he could see himself opening another gallery, realistically, given the real-estate dilemma. “You have to go somewhere way out there to even survive,” Stewart said. “If you see rats running all in one direction there’s probably an opening.”

One of the first things James Fuentes did when the market slowdown hit was cut in half the number of fairs where he showed. “It’s important to be really conservative right now, so coming up, we only have two fairs on the agenda: New Art Dealers Alliance in Miami and the Art Dealers Association of America Art Show in March,” he said. He added that he’s a longtime NADA board member, and currently serves there as vice president. He’s also a new member of ADAA. But, he added, “I imagine fairs have contributed to certain galleries failing.”

Freire had that reckoning recently, when in Chicago for the EXPO fair this past September: he found himself seated at dinner across from a young businessman who was accompanying his wife. The businessman was just starting to get into the art game. Curious, he asked Freire about the financial machinery that powers Team Gallery.

“He was appalled,” Freire said. “We do art fairs where we don’t make any money, and the art fairs sell themselves to us, not based on the idea that we will profit, but that we will go there and lose money—but we’ll come back with, you know, business cards.”

It was early October at the time of our conversation, so I asked if he was participating that month in Frieze London, a fair that many New York galleries feel is indispensable, and vital to raising a profile across the Atlantic. He wasn’t.

“A lot of my colleagues are going to Frieze,” he said. “I hope they all do really well. I did that fair for 10 years, and the two biggest financial disasters in my gallery’s history were huge booths at Frieze, out of which we sold no works at all. Of the 10 years I did that art fair, we came back with a profit just twice. By what business model is that normal?”

Stefania Bortolami has also cut out a few fairs—she declined to participate in Frieze London and FIAC this year, though she usually does both. She decided to take the $70,000 she would have spent on booth costs and travel expenses, and put it instead toward a program she’s called Artist/City, which stages innovative projects in small cities: Eric Wesley did a show in an abandoned Taco Bell in St. Louis, and Tom Burr staged one at a Marcel Breuer–designed building in New Haven.

“I’m going to do art things instead of commercial things,” she said. “We’ve sold three [Wesley] works to museums, [with the Burr], we’re in talks with a museum to acquire the whole thing. For $70,000 or $80,000 you create culture, it feels like you’re doing something real.”

And yet, Freire allows that if the fairs continue to dominate the market culture, the galleries will keep coming back. “They are the casino, and we are the drunk grandparents spending our grandchildren’s inheritance,” Freire said. “The house always wins.”

Things aren’t all bad. Grauer pointed to the recent arrival on the Lower East Side of former Chelsea galleries Derek Eller and Foxy Production. And Bateman insists that the recent spate of closures shouldn’t give anyone too much pause, as it’s fairly normal.

“I’ve been tracking this for nine years,” Bateman said. “The thing is, on the Lower East Side, the galleries keep coming. We’ve lost some people with high visibility, but that doesn’t mean there’s more galleries leaving now than before.”

As for Chelsea, with leases for many spaces ending in the next few years, we may be on the verge of a major revamp. It’s already happening: The landlord for both 516 and 520 West 20th Street will be doubling the rent when the leases expire in February 2017, essentially kicking out the tenants—ZieherSmith and Bortolami. With the departure of both Anton Kern and Elizabeth Dee, the block is losing four crucial galleries. ZieherSmith pays $25,000 a month now, and if it renews, it would pay close to $50,000. When I asked if her gallery paid $25,000 a month for her space next door, Bortolami said she paid “much more” and to stay, it would be double, or triple, that. Zieher said that his landlord’s preferred tenants are tech start-ups with venture capital funding.

Zieher says they’re still looking for a space, but Bortolami has found hers. She’ll be moving to 39 Walker Street in Tribeca, next to Alexander and Bonin—another recent Chelsea transplant—and the Artists Space bookstore. She can’t wait to get down there.

In Chelsea, “I’d be paying double just to serve the mega gallery—I would be the sucker,” Bortolami said. “They will always be here, they own their spaces, that’s fabulous, but I’m happy to move away.”

And she’s not far from what was the gallery mecca of another era. “There’s a bit of nostalgia—the space that I’m taking, it’s cast-iron, it’s downtown,” she said. “It’s like one of the old SoHo spaces.”

Nate Freeman is senior staff writer at ARTnews.

A version of this story originally appeared in the Winter 2017 issue of ARTnews on page 116 under the title “Mom & Popped.”