The Reshaping of
Contemporary Art Sales:
A Market in Transition
Art Basel Miami – © Photo: ArtPremium
The contemporary art market is experiencing its biggest shrinkage in living history as gallery closures accelerate and sales plummet from 2022 onwards. What insiders had originally thought might prove a cyclic slowdown increasingly appears set to result in a root-and-branch overhaul of an over-burgeoned ecosystem.
The Size of the Crisis
The numbers are a grim scene. First-half 2025 sales in the realm of fine-art auctions totaled $4.72 billion, a year-to-year slump of 8.8 percent as well as a dramatic 40.9 percent lower than in 2022’s first half. More telling, though, than these headline numbers is the litany of gallery closures affecting business along the whole spectrum, from newcomers to old-guard heavy hitters like Blum, Venus Over Manhattan, and Kasmin.
The closing of Clearing Gallery is symptomatic of the wider crisis. Despite owner Olivier Babin’s innovative initiative to circumvent orthodox participation in Art Basel by installing a rival space in a villa in Basel, the gallery could not keep pace in monthly expenditure of $150,000 against declining sales. The August closure of the gallery and bankruptcy proceedings demonstrate how innovative forms of expense management cannot fix the underlying contraction in the market.
Structural Overcapacity
Belgian collector Alain Servais explains what so many in the industry now concede: this is not a cycle slump but a structure problem calling for wholesale downsizing. The art market swelled exponentially during the bubble of the pandemic decade, constructing an unsustainable supporting structure of superfluous numbers of advisors, galleries, artists, and fairs to compete over a dwindling pool of active buyers.
The statistics support him. Soho Art Materials, a directory of gallery businesses, outlines how orders for stretching canvases have fallen from 700-1,000 per annum in 2020-2022 to approximately 200 per annum today. This 70-80 percent decrease in a core business is a reflection of the precipitous decline in exhibition business across the gallery sector.
The Economics of Gallery Operations
UK gallery fiscal reports underscore how lean margins render companies vulnerable to decreases in revenues. Sadie Coles HQ, a traditional London gallery boasting nearly 60 artists in its roster, saw sales dip from £59 million in 2023 to £28.6 million in 2024. More ominously, its after-tax profit margin declined from 7.2 percent down to 0.7 percent, demonstrating how fixed expenses place existential strain when revenues decline.
The expense of long-term lease commitments aggravates these challenges. The 20-year lease commitment of $8.5 million annually, or $220 million over the life of the lease, of Pace Gallery demonstrates how expansion-era decisions nowadays restrict operational flexibility during a recession.
Changing Collector Behavior
Top collectors are pulling back from active purchasing, leaving a psychological and financial footprint that extends beyond personal expenses. Beth Rudin DeWoody, who has a 10,000-piece collection and whose purchasing decisions once dictated direction in the market, says she has reduced her purchasing activity by a lot. This pulling back by trendsetting collectors disrupts the herd mentality that once drove demand for new artists.
The spec bubble created during the pandemic has dissipated to a large degree. The buyers who were interested in investments and created ultracontemporary sales have turned to other asset classes, and galleries are stuck with primary prices that no longer coincide with secondary market prices. Paints sold in primary sales at $500,000 are found in auctions at $250,000, which is creating a core pricing discrepancy not encouraging serious buyers.
Adaptation Strategies
Successful galleries are employing a range of methods to cope with the slowdown. Some are embracing geographical diversification and lower overhead strategies. Leo Koenig is employing a three-site platform of its core location centered in Manhattan’s Upper East Side, seasonal excursions in Palm Beach, and a summer gallery in Manhattan’s Catskills, where overhead is relatively lower and where the experiential factor makes up in value terms for the buyer.
Smaller, leaner galleries with modest overhead are in a position to capture market share from incumbent players who are inhibited by sunk costs. Sebastian Gladstone is a classic example, maintaining overhead lean with only two employees as he expands in a strategic fashion to new locations. These new entrant dealers have lower-cost structures along with greater flexibility in operations.
Market Recovery Indicators
Even as business declines, hot spots of activity indicate business is settling into a new normal as opposed to failing outright. The galleries indicate that sales now take far greater amounts of time and energy, with sales success rates slipping from virtually universal sales to about 60 percent sell-through exhibitions, but galleries with the right artists at reasonable prices are still able to sell.
The fact that Will Cotton’s debut at Templon Gallery sold nearly everything in the range of $80,000 to $250,000 demonstrates there is a market for quality work at fair levels of pricing. Similarly, new artist exhibitions in popular mediums such as fiber sculpture remain popular when priced in a reasonable range.
Implications for the Future
The current contraction is a needed adjustment to unsustainable growth over a few years. The shakeout of spec buyers and overcapacity may establish a better foundation from which to create sustainable future growth. But during the transition phase, there will be casualties among galleries that are not capable of adjusting their cost structure nor market position quickly enough.
The survivors of this restructuring will hopefully operate based on fundamentally different business models, ones in which efficiency is emphasized over expansion and sustainable progress over speculative gains. As was suggested in Olivier Babin’s conclusive analysis, shaking out of the current structure may well follow evolutionary changes in which wiping out dominant species makes room for otherwise adaptive competitors to emerge and thrive.
The art market’s future will depend upon its ability to achieve sustainable prices, reduce overhead from operations, and recover faith from collectors based in intrinsic value as opposed to potential for speculation. This is a challenging transition for current players but may, in the long run, create a healthier and more sustainable contemporary art ecosystem.