CONTEMPORARY ART MARKET TRENDS GALLERIES AUCTION HOUSES
In an essay for Taiwan-based art magazine Artco, Art Radar founder Kate Cary Evans discusses the tectonic shifts in the Hong Kong art scene over the past decade and what they mean for the future. Part two in this three part series discusses the current prospects for galleries in Hong Kong.
Read the original ARTCO article here (traditional Chinese).
How are Hong Kong dealers faring?
Let us examine the topology of the gallery system in Hong Kong to find out to what extent worldwide trends in the art market and general retail environment are playing out there. Are there special opportunities and challenges which are unique to Hong Kong?
Hong Kong’s low-hanging fruit
It would seem Hong Kong bears low-hanging fruit for the beleaguered dealer looking for sales. After all, it has the fastest growing millionaire population in the world with, according to the World Wealth Report 2011, a growth of 33 percent reported last year. There must be more than a few art buyers among its 205,000 millionaire households.
Meanwhile, it perches on the rim of the Chinese mainland, which boasts a market for art that is mouth-watering in scale and growth rate. According to Thierry Ehrmann, the founder of ArtPrice, China’s recent growth has profoundly modified the geographical structure of the global art market.
China is the largest art market in the world when measured by art auction sales value. It now generates 41 percent of global art auction revenue and has six artists among the world’s top ten and five of the top ten cities for art sales in the world.
And the growth story goes on. China is continuing to win market share from the USA, a country that produced 24 percent of global art sales in 2011 compared with 30 percent in 2010. This benign environment has convinced a number of Western gallery owners to open shop in Hong Kong in the last three years.
Mega-galleries move in
The French mega-galleries arrived first. In September 2010, Edouard Malingue, the first gallery in Hong Kong dedicated to Impressionist and modern masterpieces, opened with a show of forty Picasso pieces. De Sarthe is another long established Paris-based gallery which opened recently; it too has been showing mostly Western modern and contemporary masters.
Next came American dealer Larry Gagosian, who opened the eleventh outlet in his fast-expanding chain spanning eight countries in January 2011. In 2012, Jay Jopling opened White Cube in his first venture outside of London and was soon followed by Simon Lee. Dubbed by his native press “the French Gagosian”, Emmanuel Perrotin has claimed space above White Cube on 50 Connaught Road.
Selling Western art
Newly-arrived dealers dutifully explain their motivation for setting up in Hong Kong, each echoing the sentiments of the others. “We are trying to develop the market for our artists. Serious collectors are emerging in the region, especially in mainland China, and foundations are beginning to collect on a big scale. A lot of young collectors we have met are showing interest in Western art, which we hope to develop too. This is just the beginning of a new journey,” said Tim Marlow of White Cube.
But will the Chinese buy?
Will Chinese and Asian buyers snap up Western artworks at the rate needed to maintain giant galleries in spaces with pricey rental contracts. As most local dealers are keenly aware, Hong Kong’s open market, short leases and limited retail space can send rents soaring. Rent volatility causes shops to open and shut as frequently as a fish’s mouth.
Today an influx of incoming international brands, particularly fashion brands, looking for flagship stores has created an acute shortage of available space. Real estate broker Savills reports that prime street shop rents increased by 31 percent in 2011. In Hong Kong, the costs are high, the competition fierce. But are mainlanders even buying in the first place?
At the opening of Gagosian‘s 5000 square foot space in the Pedder Building in January 2011, Ben Brown, who opened his eponymous gallery on the third floor some months earlier, sounded a warning. He told the Financial Times that serious buyers for western art in Asia tended to be wealthy Taiwanese, Koreans and Indonesians. “The first thing mainland Chinese are going to do is buy their own,” he said. “They know the Chinese contemporary art market well.”
Nick Simunovic, managing director at Gagosian Gallery Hong Kong, told the Financial Times in July 2011 that initial responses to the gallery’s exhibits had been “extremely positive”. “Sales since the gallery opened have been strong. I would estimate that fifteen to twenty percent of our clients are based in greater China, with the balance coming from the rest of Asia,” he revealed.
This sounds like careful wording: China-based does not necessarily mean native Chinese, Greater China stretches beyond the mainland to include Hong Kong and Taiwan, and twenty percent is not that high a figure.
Back in September 2010, Edouard Malingue also sounded positive. On opening his gallery he told CNN, “Hong Kong’s status as a gateway to mainland China offers us access to a fast-growing appetite for Impressionist and modern art in the mainland. We see many business opportunities here in the long run.”
Despite recent reassurances that the gallery is doing well, Edouard Malingue’s sentiments expressed in February 2012 to The New York Times are more subdued: “There is not as much of a culture of visiting galleries as there is in Europe. It takes a lot more effort to grab people’s attention.”
Is it a question of time?
The international auction houses, which have been selling art to Chinese buyers since opening their doors in Hong Kong in the 1970s, might provide clues helpful to dealers.
Western works at auction come to Hong Kong for preview only and, significantly, are still returned to the West for sale. This is not encouraging, but in the long term, the houses are hopeful. Sotheby’s opened 15,000 square feet of space in May 2012 in an attempt to win over Chinese collectors. Christie’s opened a similar-sized space in 2011.
The Wall Street Journal reports that both auction houses said their new Hong Kong galleries represent a key part of their plans to broaden the palate of China’s art buyers who are still more interested in Chinese paintings than they are in household Western names like Pablo Picasso.
Kevin Ching, chief executive of Sotheby’s Asia told the Wall Street Journal that Sotheby’s gallery will attempt to educate Chinese buyers on Western art by first introducing them to Asian artists who already enjoy an international following, like Japanese artist Yayoi Kusama, as well as nineteenth century French painters like Claude Monet, whose Impressionist landscapes are immediately recognisable to collectors everywhere. Christie’s is considering offering courses in partnership with leading Chinese universities. Both have set up Asian advisory boards to strengthen their links with collectors.
Despite considerable activity and investment, so far there is little sign of success when it comes to selling Western works to buyers from mainland China. However, Sotheby’s and Christie’s have built a strong business in selling Chinese works to local collectors. Forgery is rife in the Chinese auction market, and mainland buyers have more faith in Western auction houses. Perhaps this is a pointer to a successful near-term strategy for Hong Kong dealers.
What do local dealers think?
How have local dealers responded to the influx of new galleries? With yowls, humphs and some cynicism. The most common complaint is that Hong Kong will develop a two-tier market: one serving up high-priced, predictable, international, usually Western, branded art works to an Asian ultra high net-worth elite, and another cheaper local art ecosystem that is disconnected from the former. Hong Kong artists and Hong Kong dealers will not benefit from new arrivals.
Yelps of protest there may be, but this has done nothing to stop the rush of planned openings. Perrotin opened in mid-May, as did Sutton PR, and ArtPrice plans to open an office in Hong Kong later in the year. Local galleries are used to change and adapt to it well: many of the spaces, or at least their owners, have lived through the Tiananmen Square uprising in 1989, the handover from British to Chinese rule in 1997, the Asian Crisis in 1998 with a long period of economic recession culminating in SARS in 2003, and the Lehman’s crash in 2008. But despite the tough environment, most local dealers have survived and prospered.
Read the original ARTCO article here (traditional Chinese).
This essay was written by Art Radar founder Kate Cary Evans and first published in the Taiwan-based magazine Artco, who have given permission for republication.
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