The COVID-19 pandemic has had a humbling impact on many industries including the luxury segment and the $64 billion art market. A new, mid-year survey by Art Basel and UBS, ‘The Impact of Covid-19 on the Gallery Sector’ aims to provide initial insight into the impact of the crisis, with responses from 795 galleries covering 60 different markets, and 360 collectors from the US, UK and Hong Kong SAR (China).

The report is authored by renowned cultural economist and Founder of Arts Economics, Dr. Clare McAndrew, and integrates research from UBS Chief Investment Office and UBS Evidence Lab Insights. To mark its launch, McAndrew joined Paul Donovan, Global Wealth Management Chief Economist UBS, and Noah Horowitz, Director Americas Art Basel in a conversation led by Melanie Gerlis, Art Market Columnist and Contributor Financial Times.

Gallery sales contracted by over a third, and one third of galleries downsized

‘On average, galleries saw their sales drop 36% compared to the same period in the first six months last year,’ says Clare McAndrew—findings that mirror sales across luxury goods industries. Nearly all galleries closed their premises between January and July 2020, and one third of galleries downsized, losing an average of four employees, with around half of losses being full-time.

Collectors remain active and engaged

‘Although it’s been a tough market, collectors are still purchasing, based on the data that we gathered from the collectors survey with UBS,’ comments Noah Horowitz. Contrary to other recessions, gallerists noted an acute awareness and strong drive by some collectors to support the arts. In the first half of 2020, most collectors across all regions purchased a work of art, with 6% purchasing ten or more. Of those surveyed, 59% said the COVID-19 pandemic had increased their interest in collecting, with 31% saying it had done so significantly.

Millennials continue to be the biggest spenders

The survey revealed differences in behavior across generations: only 3% of millennial collectors had not purchased an artwork in 2020, versus over one third of boomers. The millennial segment also had the largest share of high spenders, with 17% having spent over $1 million in the six-month period, versus just 4% of boomers. Nearly all millennial collectors and most Gen X collectors were actively working with galleries during the crisis, while 40% of boomers reported that they were not actively working with a gallery at this time.

The art market’s shift online has accelerated—and is here to stay

The art market has historically been slow to embrace e-commerce; however, findings indicate that this has changed in the face of the crisis. In the first half of 2020, online sales accounted for 37% of galleries’ total sales—up from 10% in 2019. Of the collectors surveyed, 85% or more had visited online viewing rooms for galleries or fairs, with just less than half of those having used them to finalize the purchase of an artwork. The majority (66%) of galleries surveyed anticipated that online sales in the gallery sector would further increase in 2021.

Collectors welcome improved price transparency

A shift towards greater price transparency through online viewing rooms and digital platforms was cited anecdotally by collectors as one of the more progressive outcomes of the crisis: 81% felt it was important or essential to have a price posted when they were browsing works of art for sale online, and some also felt this was important to maintain in future on- and off-line sales. ‘I think that’s something you can’t ignore,’ says McAndrew. ‘It’s good for new buyers and established collectors, as well as advisors.’

Boomers are more likely to continue to seek new discoveries

During the first half of 2020, one-third of collectors chose to only buy works by artists they were familiar with, or had bought before—a trend which, if continued, could reinforce the status quo, making it harder for younger artists and galleries to become established. Significant differences, however, were found between generations: ‘the Boomer generation is actually the one most interested in looking for new galleries, which runs contrary to what you might have thought,’ notes Horowitz. 35% of Boomers said they were seeking new discoveries—more than twice the share of millennial collectors.

Collectors continue to value physical encounters with art above all

Though online platforms are widely used, collectors indicated that they are not their preferred means to interact with the art market. Asked how they would prefer to view art, 70% opted for attending a physical or offline exhibition or fair, versus 30% who preferred to use online viewing rooms or other online platforms. Despite ongoing restrictions on travel, most collectors (82%) were still actively planning to attend exhibitions, art fairs and events sometime in the next 12 months. ’Humans are naturally curious; we don’t like sitting at home,’ says Paul Donovan, who anticipates international travel will return despite an immediate trend towards localization.

Asked to identify a positive emerging trend, Donovan identifies the ‘striking’ surge in business creation since the end of lockdowns. ‘People are setting up their own businesses. To me, that signals a general degree of confidence in the economic future [..] We always underestimate how much people can adapt in the face of changing circumstances. I think the same applies for the art market.’

Commenting on the report Christl Novakovic, CEO of UBS Europe SE and Head Wealth Management Europe, said: ‘From our conversations with collectors it is apparent that there is a continued drive to support the market. Digital platforms can increase price transparency and broaden the base of new buyers at different price levels. Strengthening this globalized community is essential for the health of the market in the future.’

September 2020