Michael Reid owns art galleries in Australia and Germany. This piece is being published in the Australian Financial Review:
They are coming…….Australian collectors and gallerists be aware. Within three years a major European and/or North American art gallery will open in Sydney. This inevitable international art market migration down under will fundamentally change the Australian art world.
This is not a hypothetical, sitting at my desk, typing away scenario. In recent times a clutch of significant international brands have opened stores in Australia, or are talking to Australian retailers in Australia, or looking at Australian real estate. Scotch & Soda, Marks & Spencer, Hamleys toy shop, H & M, Uniqlo, River Island, Banana Republic and Old Navy. Flushed with success from its Australian launch, Spanish fashion powerhouse Zara is already looking to sell homewares in its flagship stores, as well as investigating entirely stand alone retail sites.
Though our population may be modest, our economy ranks on some scales as high as 12th in the world. As a nation we have traditionally been enthusiastic early adaptors of change – witness the speed of our uptake of technology. When they come, we love them big time.
This global rampage down under will spread across all markets. The Australian art market is no more immune to this global brand influx than Coles and Woolworths have been immune to the coming of Aldi or Costco. The Australian art market is not a special economic exclusion zone.
For an overseas art gallery there are no significant barriers to entry into the Australian art market. You can easily buy or rent retail space in Sydney. Australian import tax (10% GST) is reasonable – try 19% VAT import tax on the entry of art into Germany. This tax differentiation would mean that an overseas art gallery would be able to deduct, say, German VAT from the value of an artwork exported from Germany and add only 10% to the value on import of that artwork to Australia. The cost of artwork would at this point be 9% cheaper in Australia. Shipping costs would probably mean that the cost of art from a German artist would be the same in Australia as Germany – but hey that’s not too shabby when you consider the artwork has been transported half way around the globe.
The Australian dollar is historically strong, yet it is still significantly less than Sterling, the Euro and the US dollar, so the start up costs right now for an overseas art gallery coming to Australia are less than the start up costs would be for an Australian gallery opening up overseas. I thank my lucky stars that I established my art gallery in Berlin when the Australian dollar was more valuable than the US dollar and much better against the Euro. These things make a huge difference.
The Australian dollar is neither too cold nor too hot. It’s weak enough to make the start up and initial running costs for an Australian art gallery an attractive prospect to an overseas art gallery. But the Australian dollar is also spookily on a long term high which makes the repatriation of profits back overseas not unattractive either.
Aside from the general world trend for major brands to move down under, the European and North American big brand art galleries have been increasingly exposed over the last few years to Australian art collectors through the art fair Art Basel Hong Kong (another European mega brand).
The bigger international galleries have seen a steady trickle of Australian collectors heading to Honkers for fun and spending. On the back of this annual overseas art galleries eye opener, sales representatives from White Cube and Sadie Coles – both major London art galleries from – were in Sydney just last month talking to collectors and possible Australian art market collaborators about future “projects”. They’ve been here; they’re scoping. And the international auction houses have specialists in Australia every other week.
And let me put the scale of these overseas art galleries into context. Deep breath. David Zwirner galleries in New York and London employ around sixty people and have a combined annual turnover that I would say is closer to a billion than half a billion Australian dollars. Larry Gagosian, who has twelve galleries internationally, (including – go figure – one in Greece) is personally believed to sell over $450 million Australian dollars worth of art each year, all by his little old self. He is the God of sales. Larry personally would easily outsell the entire turnover of the Australian art market. When the bigger European and/or North American art galleries come to Australia they will have public relations teams, production budgets and a reach only surpassed by the juggernauts of Christie’s (US 5.9bn turnover 2013) & Sotheby’s (US 5.1bn turnover 2013).
And we will love them. The big art brands will directly appeal to those internationally travelled and focused, aspirational Australian collectors that will revel in being “the first on their block” to be duchessed by the foreigners (if they have not been already). In a heart beat they will transfer their spending away from the Australian galleries with which they are now all too familiar, into the arms of the more glamorous, bigger named art brands. They will be wooed with the resources and panache that only the mega galleries can afford. A former colleague who went back to London to work with one of the well known contemporary art galleries told me about a champagne reception (and it was the good stuff) for 1,000 collectors (yes a 1,000) followed by the top 220 collectors being whisked off by limousine to the Ivy restaurant. The logistics were astonishing and there was no change from $50,000 for the meal. The exhibition sold out and the gallery made their profit on after exhibition commission sales.
And all this will change the Australian art market. As the buying habits of the domestic, aspirational, big white cube collecting crowd shift to overseas art galleries based in Australia, they will spend less in the Australian big white cube galleries and on the Australian artists that those galleries represent. The big threat here is to the very top end of the Australian art market. Put it another way, you were buying Brett Whiteley works on paper from an Australian art gallery and now all of a sudden a well known international art gallery offers up Damien Hirst works on paper. They are roughly the same price. You can resell your Whiteley in a dozen cities across Australia. Or you can resell your Hirst in a dozen cities in each of three dozen countries around the entire world. Snap.
The antidote to the overseas influx of art galleries and artists, and the top end art hit that the Australian art market will take? We need to get the best of Australian art out into the world market, so that the artists and the brands of the art galleries that represent them are as robust as they will need to be to compete on a global market. Just saying.