Markets & Finance

Art-Flipping Speculators Boost the Young Artist Market


Kour Pour, a 26-year-old Los Angeles painter, is such a hot prospect in the art world that his first solo exhibition sold out even before the show opened last month in New York. Buyers snapped up all seven of Pour’s 8-foot-tall canvases, which depict Persian rugs and were priced at $15,000, according to Joel Mesler, co-owner of the Untitled Gallery, where the show runs through Feb. 23. Mesler says he received unsolicited offers from buyers willing to pay significantly more. “There’s a tremendous amount of speculation in the market right now, particularly for emerging artists,” says Todd Levin, director of the New York-based Levin Art Group, who has advised collectors for more than 25 years. “It is more ferocious than it’s ever been.”

Art flipping has picked up as collectors chase works by up-and-coming artists with the intention of reselling them quickly, a sign there may be a bubble in the contemporary art market. From 2011 through 2013, the number of works three years old and under that sold at auction topped 7,300 annually, compared with 4,023 in 2007 when the art market was peaking, according to research firm Artnet Worldwide.

Courtesy Phillips

Reselling better-known pieces by postwar icons such as Francis Bacon and Andy Warhol yields bigger returns—sometimes in the tens of millions of dollars. But on a percentage basis, artists born in the 1980s can be more lucrative, provided collectors choose wisely. Pieces by twentysomethings Oscar Murillo and Lucien Smith have surged more than 3,000 percent in the past two years. The outsize profits reflect a combination of lower entry prices and pent-up demand for the hottest names, mostly men under 35. “There are people out there pushing these artists like IPOs,” says Miami-based art adviser Mia Romanik.

As much as half a billion dollars are expected to change hands at the contemporary art auctions in London, which run Feb. 10-14. Among the newcomers making their auction debuts are Eddie Peake, David Ostrowski, and Parker Ito. One of the paintings on the block, Ito’s 2012 canvas The Agony and the Ecstasy, was priced at about $5,000 when the Steve Turner Contemporary gallery first offered it at an art fair in Miami in 2012, Ito says. Sotheby’s (BID) auction catalog lists it at between £10,000 and £15,000 ($16,300 to $24,500). “I kind of wish my work wasn’t at auction,” says the 27-year-old artist. “I am too young. It’s a sign of how ridiculous the art world is.”

Courtesy Phillips

Another rising star is Colombian-born, London-based Murillo, 28. In 2011, Murillo’s works were priced from $2,500 to $8,500, according to dealer François Ghebaly, who sold them at a Miami art fair. Last year 24 Murillo pieces generated a combined $4.8 million at auction, according to Artnet. At least eight of the artist’s works are on offer at the London auctions.

Skill, will, and good fortune set these high-profile young artists apart from the multitude toiling away in studios from Brooklyn to Berlin. But the Parker Itos and Oscar Murillos have something else going for them, too: well-connected art-world insiders who are buying their work while at the same time talking them up to their clients and friends.

One such person is Stefan Simchowitz, a self-described “cultural entrepreneur” who advises individuals and institutions on purchases of contemporary art. Simchowitz, also a collector, says he paid as little as $500 when he started buying Ito’s works in 2011. He owns 34 Murillos, some of which he bought for $1,500 a painting. He’s acquired at least 30 more for clients, including actor Orlando Bloom and Steven Tisch, co-owner of the New York Giants football team.

Untitled (Drawings off the wall), a Murillo canvas marked with doodles, dirt, and stains, which according to Simchowitz was acquired by a client of his for less than $7,000 in 2011, sold for $401,000 at auction last September. Simchowitz says a picture can change hands five or six times in a single year: “Every time it trades, it creates virality.”

Courtesy Phillips

To curb speculation, some gallery owners increase retail prices. Anticipating strong demand for Ryan Sullivan’s richly textured abstract canvases, Maccarone in New York priced them at $45,000 for the artist’s solo gallery show in February 2012. No paintings from that exhibition have been resold at auction, according to Artnet, while three other Sullivan works, priced at $12,000 in a 2011 group show at Nicole Klagsbrun Gallery in Manhattan, have been. The most expensive brought $185,000 at Christie’s in New York on Nov. 13. “I have to protect my artists,” says Michele Maccarone, whose gallery represents Sullivan.

When tastes shift, artists whose prices soared often are unable to sustain the momentum. “One season means absolutely nothing in terms of secondary-market pricing,” says Bill Powers, owner of Half Gallery, which put on Lucien Smith’s first solo show in New York in 2012. “The real question is: Can your prices hold in the seventh or eighth season you’ve been at auction?”

Courtesy Phillips

For a cautionary tale, consider Matthias Weischer, a German artist whose paintings of interiors were popular with speculators in the mid-2000s. He was barely into his 30s when his 2003 work Wand (Wall) sold for $125,588 at Sotheby’s in London in 2006. It fetched just $58,419 at a 2011 auction in Berlin. Says art adviser Levin: “The road is littered with people who’ve been chewed up and spit out.”

The bottom line: More than 7,300 artworks three years old and under sold at auction annually from 2011 through 2013.

Kazakina is a reporter for Bloomberg News in New York.

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