Why Do So Many Art Galleries Lose Money?

On Tuesday, the highly respected Wallspace gallery in Manhattan’s Chelsea neighborhood announced it would close its doors permanently on Aug. 7. The lease was up, and “it necessitated a reevaluation,” said Jane Hait, who co-founded the space with Janine Foeller. “It’s a particularly tough climate for people doing work that’s not necessarily super commercial.” The closure of such a celebrated fixture of the New York art scene underscores the fact that—despite the unprecedented avalanche of money blanketing the contemporary art world—it’s surprisingly difficult for galleries to make money.

The news of Wallspace’s closing comes just weeks before the English release of Management of Art Galleries, a slim, Day-Glo orange book that caused a furor when it was published in Germany last year. Written by a 31-year-old German entrepreneur/professor/art adviser named Magnus Resch, the book argues that most galleries are undercapitalized and inefficient, and moreover, that with McKinsey-like business strategies (Resch went to the London School of Economics and the University of St. Gallen, in Switzerland), the entire art market could be turned into a profit-generating machine. “I could have just said, ‘The revenue numbers are terrible,’ but rather than being so negative I’m actually offering solutions,” Resch says in an interview. “It’s based on the analysis that I did.”