As the last days of the decade click off the calendar, it’s instructive to look back at this extraordinary period of growth in the art market. Prices at the very top—culminating in the much-fixated-upon sale of a Leonardo for $450.3 million—have risen far beyond what anyone could have imagined 10 years before, when the art market seemed on the verge of an extended fallow period. Yet the story of the last 10 years has been less about the unbelievable sums that have grown more like dares than measures of value and more about the broadening base of what is considered valuable, even investable, art.

This story has a plot. There is a beginning in the aftermath of the global financial crisis when art sales recovered faster than most experienced and sophisticated participants would have imagined; a climax, when successive record sales at the top of the market created what Tobias Meyer called the “masterpiece market” of competition for works that seemed to be beyond measurable value; and a denouement of sorts, when the value confirmed at the top of the market began to move more broadly among a greater number of artists to create this now-vibrant seven-figure “middle market.”

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A Rapid Rise from a Smoking Ruin

Calling the art market a smoking ruin in late 2008 and early 2009 would have been only a slight bit of hyperbole. During the winter of 2009, one of the panic points in the global financial crisis, most art market participants expected the decade of the 2010s to resemble the market of the 1990s. When the Japanese-driven art market of the late 1980s collapsed, a deep recession cascaded throughout the 1990s art market.

After a cycle of disastrous guarantee-driven sales in the fall of 2008, one of the heads of contemporary art at a major auction house openly fretted to the press in front of younger staff that the market could be expected to hibernate for a decade or more after the previous four years’ frenzy of activity.

Those fears turned out to be the furthest from what happened. Starting with the record-setting €374 million Yves Saint Laurent-Pierre Bergé sale that Christie’s Paris held in February 2009, and proceeding through the early 2010 purchase of Alberto Giacometti’s Walking Man I for $104.3 million by Lily Safra and the $106.5 million purchase of the Brody Picasso, Nude, Green Leaves with Bust by Len Blavatnik, the art market demonstrated a kind of resilience that seemed to mock the very real panic and fear pervading the fragile and slowly healing global economy.

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Pablo Picasso’s Nude, Green Leaves with Bust, called the Brody Picasso, sold for $106.5 million to collector Len Blavatnik.
Courtesy Christie’s

The most visible sign that art market would not be pulling in its horns was the $117 million Carte Blanche sale organized at Phillips de Pury & Co. in November 2010 by private dealer (and former head of contemporary art at Christie’s) Philippe Ségalot. Word was out that the market was back. By 2011, buyers who got caught up in the tail-end of the last market cycle started looking for a respectable exit. That fall more than 10 percent of the evening sale lots on offer had been bought in 2007 or early 2008. More than half appeared with estimates above their pre-crash selling prices. At Sotheby’s in 2011, the buyer of a Gerhard Richter abstract painting who paid $3 million in November 2007 was able to see 50 percent more paid for the same painting in 2011. That Richter was one of eight abstract works sold at Sotheby’s that night. The market was astonished at the prices, all well above estimates, and the fact that there were more than enough buyers to snap up all eight works at such strong prices, one for $20 million and another for $18 million, was a revelation. Richter’s abstract paintings, especially the large ones, would go on to become a major driving force in market volume.

Buying in Public and the “Masterpiece Market”

By 2013, the rapid upward rise of prices and the prevalence of works selling above the $40 million mark would propel many market transactions into the public realm of auctions. Many buyers preferred to pay more if they could “see” another buyer pursuing the same work. Because of this, in the period starting in 2013, the auction houses achieved a level of transactional dominance rarely seen before.

The preference for public sales gave birth to curated auctions combining works from different collecting categories around themes that would highlight buyer interest but also allow for public price discovery. From May 2014 to May 2016, Christie’s held a series of special sales aimed at the masterpiece market. The biggest one totaled $705 million in May of 2015. Two years later, Christie’s would shock the world and itself with the $450. 3 million sale of Leonardo’s Salvator Mundi in its November evening sale of contemporary art. This was effectively the end of the masterpiece market though plenty of very expensive works have sold since.

Part of the illusion created by the masterpiece prices was the idea that art had become an asset class. What followed from that idea was a number of services meant to cater to managing the needs of asset holders. Financial institutions developed art strategies, boutique finance firms emerged and art advisers and dealers became more sophisticated in their ability to speak the language of finance. A few finance professionals migrated to work in the art world, especially at Sotheby’s, which reoriented itself around a strategy of making the most of art as an asset.

A few nine-figure sales do not an asset class make. The incredibly high prices paid for incredible works of art by a few of the most recognized artists—Giacometti, Modigliani, Picasso, Matisse, Munch, Bacon, Rothko, Richter, Warhol—in the period from 2010 to 2015 created a highly valuable but also very thin market. The number of collectors rich enough and passionate enough to spend $50 million or more for a work of art has always been—and remains—vanishingly small. When he was Christie’s point man for its biggest lots, Brett Gorvy said he kept a list of all the clients who might spend $50 million or more on a work of art. The list was said to only have 141 names.

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Employees at Sotheby’s London move a Gerhard Richter Abstraktes Bild painting ahead of a sale earlier this year. Richter is one of a select few artists whose work regularly garners nine-figure prices at auction.
Anthony Harvey/Shutterstock

Beyond the Peak

There are, of course, far more than 141 art collectors in the world. Knight Frank estimates the population of Ultra High Net Worth Individuals, households with liquid investments worth $30 million or more, at 198,342 in 2019. There’s no good evidence explaining how or why new collectors have come into the art market since the 2015 peak. Anecdotal evidence, including the growing diversity of art and artists that regularly achieves high prices, suggests the market over the past three years has experienced a real shift.

Competition now lies in lower price bands with a greater number of lots appearing at auction in the $1 million to $5 million estimate level. This reflects the growing interest in and competition for works by artists who were previously overlooked or part of a group whose value was historically underestimated.

For much of the last four years, reporting on the art market has focused on the putative weakness reflected in the headline numbers. In this view, the market’s overall volume at auction has fallen, which must mean the market itself is down. There is another potential explanation. Instead of viewing the market as down because of the lower auction volume, we might take into account the fact that prices have stabilized in the years since the 2015 market peak. That suggests sellers and buyers are more comfortable with private transactions that don’t require the public confirmation of another bidder. If the market was truly down, we would see prices dropping across the board. Instead, we see weakness in the works of some artists but not a wholesale weakness in the market. Quite the contrary.

This alternate view of the market also takes into account a buyer’s ability to triangulate from objectively high masterpiece prices to relatively high prices for masters of a different type.

The essence of an asset class is not the ability to make a profit from owning the asset (though that is obviously a powerful motivation.) The option to sell even when times are bad and maybe for prices that are not as strong as what was previously paid—in other words, to get some of your money out—that also makes an asset attractive to a buyer. To preserve that option, there has to be another buyer who will come along behind you. With the emergence these last four years of a broader, more valuable market with a wider range of buyers looking for a wider range of artists, we may have finally reached the stage where art is behaving like an asset.

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