On Friday, Sotheby’s revealed its re-conceived and expanded 90,000 square feet of exhibition spaces
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Judging from the reaction to Friday’s announcement that Sotheby’s is nearing completion of a $55m, two-year renovation, the significance of this event is getting lost. The construction project will reshape the first four floors of Sotheby’s headquarters building on York Avenue in Manhattan to make 90,000 square feet exhibition space (increasing it by nearly 50%) that includes three two-story galleries among the 40 new spaces as well as a single wall presenting 1200 un-interrupted square feet of wall space and another that is 106 feet long. But that’s not the dramatic part.
The decision to re-make Alfred Taubman’s carefully planned glass tower reveals yet another step in Sotheby’s search for a corporate strategy that will open a path toward a transformation of Sotheby’s business. Real estate is a tell for Sotheby’s now as much as it was when Taubman built the vaulted, escalator-connected headquarters two decades ago amidst a rush to open the business onto the internet.
Four years into its new ownership and leadership, the building may be emerging as an unexpected strategic asset again. When Mick McGuire first launched his activist campaign to transform Sotheby’s in late 2013, real estate played a starring role in the financial engineering McGuire believed would unlock value from Sotheby’s balance sheet. Selling the building (which Sotheby’s had used as as source of quick cash in the past) and moving to a more culturally relevant mid-town location near Sotheby’s rivals would free up hundreds of millions of dollars. At the time, Hudson Yards impresario Stephen Ross was casting Sotheby’s as a featured attraction on the podium. In 2013, Ross reportedly tried to bring Sotheby’s to his new city-within-the-city by bidding for the York Avenue building in a 1031 exchange for new space in Hudson Yards.
Only a few people would know how far the plan got and whether or why it fell apart. It doesn’t really matter. McGuire’s campaign for Sotheby’s set off a series of unexpected turns. Instead of unlocking Sotheby’s balance sheet, the corporate mandate became something bigger, to remake the company. The new CEO’s corporate motto was a seemingly limited four-point plan. But beneath that directive was the expectation of a much greater transformation.
Sotheby’s has been moving in several directions at once to try to find it. The auction house ramped up its finance division—and then brought it back down; the firm chased big estates with big guarantees—and then recognized that as high-risk, low-reward proposition; it acquired an art consulting firm for its talent and to pursue a strategy of becoming a full-service bank for tangible assets (that means providing financing, trading and advisory services for those who want to realize the most value from their cultural and luxury property.)
These moves have captured the attention of most observers, especially because the acquisition brought some out-sized personalities into the business. But the auction world is quietly shifting away from being a backdrop against which vivid characters can stand out—and not just at Sotheby’s. At the top end, estates have returned as a central driver of business replacing the sometimes “unholy” deals arranged behind the scenes to produce seemingly spectacular but not necessarily profitable results.
Farther down the scale, the middle market continues to be a strong driver of sales growth. Sotheby’s has quietly built an engine to capitalize on that growth in the Contemporary category. Below that Sotheby’s has pinned its hopes on an even more ambitious strategic play where the company becomes a high-margin, low-touch platform for connecting buyers and sellers of luxury and design objects through a mix of yet-to-be-proven technology and Sotheby’s durably powerful brand name. That’s where the new building design comes in.
Alfred Taubman made his fortune as a pioneer of high-end malls. When he bought into Sotheby’s as a white-knight his emphasis was on breaking down the barrier between the world of art connoisseurs and the luxury aspirations of the increasingly affluent population. The York Avenue HQ was built to express that strategy of breaking down barriers. Each collecting department was housed on a floor with central exhibition space and all of those spaces and departments connected by mall-like escalators that would let customers pass through each department on their way in and out. Taubman added a theatrical salesroom above the exhibition floors. On top, he built a skylit gallery for the grandest special exhibitions.
Much has changed in the art world since Sotheby’s moved to York Avenue in 1999. For all of Taubman’s genius as a real estate developer, the building had flaws that compounded some of the art market’s problems. The grand space atop the tower was too remote and isolated. As auction house specialists continue to steer their best clients toward under-appreciated works, the kind of exciting ‘finds’ that whet a buyer’s appetite for spending, the gap between the top floor and the rest of the exhibition space was too great. Even a quick elevator ride raises the stakes on what ought to be a seemingly casual encounter.
With far too many viewers thinking the auction houses are off limits or access by invitation only, Sotheby’s new galleries invert the positioning of the art within the building bringing it closer to the street and the public. Where the featured galleries used to be up top, they will now begin just off the main doors and lead up through a complex of different spaces.
The many different spaces Sotheby’s is creating will allow it to show all of the art from its competing categories during the busiest May and November seasons while still having intimate spaces for making private deals on big ticket items. Oddly, that means Sotheby’s can crowd the schedule more if it thinks the way to sell more American art is right before or after the Contemporary sales.
But the rest of the year Sotheby’s will have literally acres of unused exhibition space. That’s where the radical nature of this move comes into view. Many years ago, Sotheby’s Parke Bernet anchored a Madison Avenue gallery neighborhood when it was located across from the Carlyle hotel. York Avenue is unlikely to become a gallery neighborhood but 90,000 square feet is enough space to run an art fair, if an enterprising entrepreneur is willing to host their event inside the belly of the beast.
Dealers may still feel uneasy about exhibiting at Sotheby’s whom they view as a competitor. Sellers of the class of valuable objects that Sotheby’s wants to host on its platform may see these spaces in the opposite way. If Sotheby’s wants to add a platform business it needs to continue to burnish the halo of its brand, to show the value the platform can deliver. By giving sellers of collectibles a venue within Sotheby’s and organizing events that bring in more potential buyers both in person and online, Sotheby’s can effectively build a bridge between its brand and the low-touch services it hopes can super-charge its revenue.
Is this strategy going to be easy? No. Are there many big obstacles to success? Yes. But the decision to build it and see if they will come, is nothing if not bold. It’s also relatively cheap. Whatever portion of the $55m one assigns to the platform strategy—a third? half?—that’s cheap to help launch a new line of business.
