What It Really Costs to Be a Mega Art Collector
Photo by Evan Joseph.
It’s no secret that purchasing art requires deep pockets. What people often don’t consider, however, is just how much it costs to maintain a collection once it’s been amassed. There’s no hard and fast formula for figuring out how much one should expect to spend on the myriad associated costs, but experts cite figures from between 1% and 2% of the overall value of a collection to as high as 15% to 20%. The variation is due to the wide range of services—shipping, installation, insurance, security, appraisals, storage, and conservation—that may or may not be required of a particular collection.
Of course, the more you acquire, the more you’ll likely spend in upkeep, but maintenance is not solely a function of the collection’s worth.
“It’s much easier to look at the total number of items rather than the overall value,” explains Simon Hornby, CEO of Crozier Fine Arts, a logistics and storage company. “The only thing the value affects is the insurance. The rest of it is based really on space and time, so a dollar figure can be a misnomer for how you look at this.”
Here’s what a beginner, serious, and veteran collector might expect to pay in ancillary expenses.
A friend’s younger cousin just got an MFA from Yale. She doesn’t have a gallery yet, so you go to her Bushwick studio and pick up three mid-size photographs for only $500 each. You’re thrilled until you bring them to get framed and realize you’ll be shelling almost as much on the frames as you did on the works themselves. A few months later, you find yourself in a Lower East Side gallery, smitten with a large multi-media assemblage. Relieved you don’t have to frame this one, you commit to it on the spot, not realizing until it’s actually inside your apartment that you need to hire a specialized art installer to hang it for you. Almost immediately, you’re spending another $500 or so getting it on the wall. You aren’t yet making art-related upgrades to your living space or shelling out for storage, but still, the after-purchase costs can quickly add up.
Serious collectors have usually graduated from buying from a few galleries they know and love, to looking for specific pieces by certain artists, which often means heading to auction. That, in itself, adds additional costs to the purchase of art, since auction houses charge fees to the buyer, calculated as a percentage of the “hammer price.”
“With the buyer premiums at 20 and 25 percent, and heading upwards I am quite sure, that needs to be carefully factored into any auction purchase,” said veteran advisor Todd Levin. “If you buy something from auction, by the time you factor in the premium and New York state sales tax at 8.875%, you’re adding a full 30 to 40% on top of the hammer price.” And, he noted, by working with an advisor—as many serious collectors often do—who charges an industry-standard rate of 10%, the total cost of an artwork bought at auction can be between 40% and 50% on top of the hammer price. That means a $500,000 painting might actually run you closer to $750,000.
A collection of a hundred or more works will likely be spread over a few different homes and specialized art storage spaces. For an example likely at the higher end of this category, highlighted works from David Bowie’s collection sold for just more than $41 million last fall in a series of sales at Sotheby’s London. Opting for a store-it-yourself option would leave you without proper security or temperature control, and the possibility of having it just yards away from flammables, combustibles, or otherwise suboptimal neighbors.
If you opt for specialized fine art storage in Manhattan, you’ll pay between $10 and $12.50 per square foot per month for a private space. If you’re willing to place your collection outside of the city and in a shared, rather than private, space, the rate can drop to as little as $5 per square foot, though the latter option requires separate fees to view your own works at Crozier, Hornby said.
If you have around 100 works and half are stored at any given time, you can expect to pay $1,200 to $1,400 per month in storage fees. But, as Hornby notes, “you’re then likely hiring us to circulate that art, maybe once a year to change out the collection in your house. It’s probably going to run you another $15,000 to have those works de-installed, transported back to storage, and new works taken out and installed.”
If that collection is valued at $25 million, “you’re probably looking at...$100,000 a year as a carry cost in some shape or form,” according to Hornby.
For the works you’re surrounded with, the homes may require adjustments such as special lighting, security, and UV window protection, all of which can run into the six digits, just for standard, indoor art works such as paintings or sculptures, a professional designer who specializes in fine art placement.
Then there are the handful of collectors whose holdings are so vast and prestigious they’re compelled to share them, usually through the building of a private foundation or museum.
As a museum or foundation space goes under construction, the work has to remain secure. Collectors of this caliber are likely to make use of freeports, which allow the import and storage of works without tax liability, and promise the utmost confidentiality and discretion. This level of collector likely also has her or his own art advisor, and a dedicated staff for collection management and curation, labor costs that can quickly climb into the hundreds of thousands of dollars, at least, per year, based on typical salaries for these professions.
As with regular storage, pricing at freeports is largely dependent on “geographical differences more than anything else,” said Fritz Dietl, owner of the Delaware Freeport. Dietl declined to provide his rates, but notes that prices in his facility are less expensive than in Manhattan. “Delaware is less expensive than New York because the cost of doing in business in Delaware is lower than it is in New York.”
Established and veteran collectors are also likely hiring conservators before making major purchases. These services run anywhere from between $300 and $1,000 for an assessment, even before the conservation process begins, according to Levin. For museum-quality pieces—think works such as an “Infinity Room” by Yayoi Kusama— installation goes far beyond hiring a specialist to put the right nail in the wall the right way. It may require clearing land, pouring concrete, or reinforcing a home’s foundations.
At all levels of collecting, insurance is a must. Rates vary according to the value of the collection, so beginning collectors won’t find themselves with a massive bill.
“One of the common misperceptions that people have who aren’t in the art world or aren’t huge collectors is that art insurance is something they can’t afford because it’s specialized and very expensive, but it’s actually pretty inexpensive,” said Rand Silver, the global director of art collection management at AIG. A $100,000 painting, for example, would run anywhere from $50 to $200 a year in insurance.
“These rates are based on rate of 5 to 20 cents per hundred dollars,” Silver said, depending on the material, type of storage, and geographic location. He notes the same rates apply to artworks at any price, so the $110 million Jean Michel Basquiat painting recently sold at Sotheby’s would carry an annual insurance bill between $55,000 and $220,000 for insurance alone.
And here’s the catch: There are costs not just to buy art, but to sell it too, said Levin.
“The shipping on the back end, de-installation, transit insurance if it’s required,” he said. “Whether you take it to a gallery or to an auction house, those costs have to be factored in as well.”
Once you’re in, there’s really no turning back.
This text is Honorably extracted from artsy.net by Hoomartgallery.com