History Repeating?

It has been an uneasy season for the art world, with dealers asking themselves whether, in the midst of the subprime-mortgage crisis and a credit squeeze, the winds are bound to blow foul. A report published in January by Arttactic, a London-based firm that measures confidence in the contemporary-art market through biannual surveys, recorded a 40 percent drop between May and November 2007. Then, in a gossipy tidbit in New York magazine, the Manhattan dealer Mary Boone—a poster child of the go-go 1980s—was quoted as saying, “We are definitely in a recession.” Although some contend that Boone’s comment was taken out of context, the dreaded R-word’s appearance in print may have damaged morale.

Whatever the speculation, and despite some mixed signals, the market looked resilient. According to some exhibitors, February’s edition of the Art Show, the Art Dealers Association of America (ADAA)’s annual fair in New York, saw decent sales, although attendance was down, at 10,000 compared with 15,000 last year. That same month, the London auctions at Christie’s and Phillips posted solid results. Here again, however, there were signs of trouble, with fewer American buyers present, replaced by Europeans wielding stronger currencies. Even as the press trumpeted high sales totals, the possibility of a U.S. recession was still being broached in financial news reports, and it wasn’t far from some dealers’ and collectors’ thoughts. One New York dealer attending the auctions says he could “read the tea leaves” in some of the buy-ins.

The current art market boom has been a long one. The frantic growth of the 1980s gave way to a slump in the early ’90s, but since the first glimmerings of recovery, in 1996, except for a hiccup after September 11, 2001, the market has been rising relentlessly. As a result, a large chunk of today’s most prominent galleries, art fairs and collectors, having entered the game during the past decade, are like surfers who caught a great curl their first time out and have never known a slow run. With this in mind, whether or not any ominous rumblings are to be heard in the distance, it is worth checking in with established dealers who have been around long enough to have weathered previous storms: How did sleepier cycles play
out? What were some of the lessons learned?

Perhaps the most sensible approach to a market downturn is to “be prepared,” says Janelle Reiring, who, with Helene Winer, cofounded the Metro Pictures gallery in New York in 1980 and who has represented such artists as Cindy Sherman and Robert Longo ever since. When the economy suffered in the 1990s, it took time for it to fully affect the art market. About two years into the slowdown, Reiring remembers, “it was a shock from day to day. I jokingly said every collector must have sent a fax around to the others saying, ‘Don’t buy any more art.’ ” Some recognized the signs of a pullback sooner. The New York gallerist Perry Rubenstein calls the aftermath of the lackluster May 1990 auctions “the summer of our discontent.” These days Rubenstein and others say they rely on the frequent auctions and art fairs, which act as market gauges, as well as on the real-time art-news reporting on the Internet, for more accurate assessments of what is happening.  

Beyond keeping on top of trends, dealers can take measures to recession-proof their operations. Paula Cooper, who has been in the business for more than 30 years, points to one of the most obvious: Own your space, as Cooper, Andrea Rosen, Larry Gagosian, Lawrence Luhring and Roland Augustine and others in Chelsea do. Another method mentioned by nearly every dealer interviewed for this story is keep­ing your artists’ prices sane. During periods of prodigality like the ’80s—and more dramatically now—values increase rapidly and steeply. When dealers talk about cultivating their artists’ careers by managing their prices, it isn’t ethical posturing but good business. Most professionals agree that the art market has a kind of reverse gravitational pull: You can raise prices wildly, but lowering them risks destroying demand. In the ’90s, some artists and dealers “ suddenly saw prices go down and then experienced firsthand a kind of free fall,” recalls Marc Glimcher, the director of PaceWildenstein. “If prices go down, demand goes down.” What gets dealers into trouble during a decline, he adds, is “the pumping up of artists’ prices and the treatment of collectors like they are supposed to beg for work.” For those who indulge in such practices, he cautions that, by the time the market slows, it may be “too late for a strategy change. Your strategy should be to find a new business.”