Art Basel: Young investors discover the art market

The art market has been particularly affected by the effects of the corona pandemic in the past two years. Galleries and museums had to close temporarily or were only allowed to receive very limited numbers of visitors. That is why German galleries recorded estimated 40% drop in sales and the approximately 14,000 artists suffered substantial economic losses in some cases.

How corona changed the art market

The global pandemic presented challenges but also opportunities for the art market. In order to explain the effects, a distinction should be made between changed art reception and art distribution. Artists lacked audiences or buyers due to galleries and museums being closed for months. Art distribution was also difficult, as paintings or sculptures could be viewed and purchased less physically than digitally. As a result, developed new, digital platforms, which brought artists and collectors together and created innovative structures and business opportunities in this way.

As a result of the resulting increasing digitization, costs for artists and galleries also fell: Major exhibition projects and trade fairs were canceled or postponed, travel was only possible to a very limited extent and was not necessary, as virtual events and auctions quickly became important. While online sales did not yet play a role in Germany in 2012, around 15% of sales were generated online in 2019. That was around 140 million euros nationwide.

Viewed globally, the segment experienced contemporary art in 2020/2021 according to the study The Contemporary Art Market Report even an upswing: The global turnover of 2.7 billion dollars represents a stronger market than ever before. A total of 102,000 contemporary works have changed hands within twelve months — ten times more than 20 years ago.

Contemporary art now accounts for 23% of total global art auction revenue, compared to 3% twenty years ago. The top 5 artists of the era in terms of their auction turnover were Basquiat, Banksy, Nara, Condo and the NFT pioneer Beeple. Together, they accounted for almost a third of the entire auction market for contemporary art during the period under review. From this alone, it can be concluded that more and more young collectors are discovering the art market for themselves.

Millennials invest in art

Data from Art Basel and UBS Art Market Mid-Year Review 2021 substantiate this thesis. The market report is also based on information from 500 collectors from Germany, Switzerland, Great Britain, the USA and Hong Kong, who have investment assets of at least one million dollars. While their average spending on art and antiques this year rose by 42% on average to 242,000 dollars compared to 2020, wealthy millennial collectors spent 378,000 dollars on average — more than three times as much as Gen X art fans and baby boomers. Overall, 5% of millennial collectors keep more than 30% of their wealth in art — 10% more than the Generation X peer group and more than double the baby boomers.

Their research and art purchase takes place primarily via digital channels. A majority of respondents said they use social media platforms such as Instagram to search for and buy art. Age was also reflected in sales channels. The share of digital art platforms has more than doubled compared to 2019 and is now 33%. The art itself is also becoming more digital. 16% of the works that the collectors surveyed own are digital, film or video art. This category accounted for more than a tenth of spending, with respondents buying digital art for an average of 20,000 dollars.

Collecting art — not just for millionaires

The progressive digitization of the art industry is complex and includes both art forms (crypto art) and sales channels such as digital marketplaces, trade, exhibition and auction platforms. So-called Nonfungible token (NFT) experienced a boom at the beginning of the year. Compared to 2020, the global trading volume with NFT is around 15 million dollars at over two billion dollars in 2021 increased.

The auction house Christie's auctioned off a digital work of art for the first time in March. For a good 69 million dollars, the Collage by artist Beeple with the title “Everydays: The First 5000 Days” the owner. A record amount for a unique digital item whose authenticity was secured with an NFT certificate on the blockchain. The auction was particularly popular among millennials: 58% of bidders were born between 1981 and 1996. 91% of bids came not from regular bidders from the traditional auction house, but from new interested parties.

The blockchain as a display, verification and authentication tool will continue to establish itself in the traditional art market and lead to a democratization of the industry. As a result of the boom, digital artists can become better known and sell their works more expensively. Collectors and investors also have the opportunity to secure works of art or shares (tokens) in them via digital marketplaces and invest in a Average yield of 5.26% p.a. to participate.

Benefit from art with a portfolio of tangible assets

Specialized marketplaces manage the entire art investment process: starting with screening, through the purchasing process, to duty-free storage and potential profit recognition. By low-threshold investment opportunities Digital marketplaces promote both the democratization and liberalization of the art market as well as of buyers. Because even without expert knowledge, an extensive industry network and a large budget, art lovers can build up a diversified and attractive portfolio of tangible assets with small amounts of digital shares.