Fine art is often shielded from the ravages of an economic downturn because of its status as a safe haven for wealthy investors. But this crisis has been different.
Lockdowns and social distancing measures across the globe have ruled out gatherings, making it impossible to visit galleries, hold exhibitions or strike deals at networking events - where most transactions in the art world normally occur.
Sales of artworks have contracted by over a third globally in the first half of 2020, and one third of galleries have downsized, losing an average of four employees, according to a report co-published by UBS and Art Basel.
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"The art market has often shown resilience to events in the wider economic and political environment," said Clare McAndrew, a cultural economist and author of the report. "But the Covid-19 pandemic in 2020 has presented the market - and the gallery sector in particular - with some of its biggest challenges yet."
Of 795 galleries around the world in the modern and contemporary art sector surveyed for the report, 93 per cent had closed their premises between January and July 1.
In Hong Kong, however, where the government has never imposed stringent lockdown orders, many galleries managed to keep going through the height of the crisis, though with a decline in foot traffic.
"I think we've been very lucky. We haven't cancelled or pushed back on any shows except one in March," said Julliana Choi, director of Over the Influence, a gallery located in Central. "We definitely see fewer people coming to see our shows. That means we were still able to do business as usual, but just with less pain."
The downturn in the art market has been similar to that in other sectors that rely on consumer spending. As buyers earn less money or become more cautious about spending on big-ticket items, so sales decline, said Adrian Zuercher, head of global asset allocation, UBS Global Wealth Management CIO.
But the physical constraints imposed to curb the infection have been the crux of the weakness in the sector, Zuercher said.
"Very often you go into a gallery or an art market to look at the art piece. The decision to buy usually occurs at a social event where you participate, such as auctions, " he said. "There are networking elements involved."
Compared with collectors from the US and UK, buyers in Hong Kong are more cautious about attending art events, according to a separate survey of 360 wealthy collectors, within the same report. Only 23 per cent said they would attend an art fair outside the city in 2020, although nearly half would go to a local fair.
As most buyers still prefer to see the artwork before making a purchase, the digital transformation of art sales has lagged behind other retail sectors. But the pandemic has accelerated the process.
According to the report, online sales accounted for 37 per cent of total sales in the first half of 2020, a huge jump from 10 per cent in 2019.
Art Basel Hong Kong, the city's largest annual art fair, opened online exhibitions to make up for the cancellation of its show in March.
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"Most of our clients have had to buy more virtually, which means we send them pictures of the artwork and they decide to buy rather than at the gallery," said Choi.
But the shift to virtual purchases may also incline buyers to stick with the artists and galleries they know. While 92 per cent of the high net-worth collectors surveyed had bought a work of art so far in 2020, only 14 per cent were actively looking for new galleries, while a third chose to only buy works by artists they were familiar with or had bought before.
"This will reinforce the status quo and make it harder for newer and younger galleries to establish themselves," the report says.
In Hong Kong, however, half of the collectors surveyed interacted with both new and existing galleries, higher than those from the US and the UK.
Though there is some optimism across the industry for 2021, only 45 per cent of galleries globally expected sales to increase from this year, according to the report.
"The feeling of going to see the artwork at an exhibition, in a gallery or at an art fair is irreplaceable," said Choi. "Hopefully if the global situation and the travel arrangements all get better, I think our market will bounce back very quickly."
More from South China Morning Post:
- Art Basel launches online viewing rooms after cancelling Hong Kong show amid coronavirus
- Hong Kong art galleries open for business despite coronavirus and Art Basel cancellation