Competition in the auction middle market is fierce and getting more intense

Editor’s note: This story originally appeared in On Balance, art news Newsletter about the art market and beyond. Register here Receive it every Wednesday.

A former executive at a global auction house recently shared an interesting statistic with me about the industry’s so-called “middle market.” The term means different things to different auction houses, but generally refers to lots worth less than $1 million and collections worth less than $5 million. This source told me that across all auction houses, lots under $1 million (conceptually) attract 10% or less of the attention, 50% of the hammer price and 70% of the proceeds. But the problem for auction houses in all price ranges, but especially this one, is that margins are being squeezed as overheads rise and sellers demand a greater share of profits.

Complex financial deals – such as enhanced hammers, in which the seller receives a percentage of the buyer’s commission, or guarantees, in which the auction house promises to pay a minimum amount no matter how much an item or collection sells for – used to be limited to the top of the market. But this type of deal is penetrating into the middle market, where there are more players and more competition. These include Heritage Auctions, Rago/Wright, Bonhams, Freeman’s and Doyle, as well as many smaller regional auction houses such as Vogt in Texas, Stair Galleries in New York and Brunk Auctions in North Carolina, to name a few.

Small estates that were once the purview of estate lawyers have now “infiltrated advisors and trust intermediaries who are familiar with the high end of the market” and are demanding aggressive deals, according to a leader at a regional auction house. Meanwhile, another auction leader specializing in trusts and estates told me that, with the exception of celebrity estates, Bonhams has largely vacated the space, leaving it to Doyle and Freeman’s (which reportedly handled 131 trusts and estates last year) and smaller regional firms. It’s not because of a lack of buyer demand: Stair sold Carole Harris’s decorative arts collection last year for $4.5 million, three times its presale estimate.

According to the 2026 U.S. Art Market Report released by Bank of America and ArtTactic, 94% of transactions at U.S. auction houses Christie’s, Sotheby’s and Phillips last year were less than $1 million. Art worth less than $50,000 accounted for 61.3% of the total lots sold by the three auction houses in the United States, well above the pre-pandemic average of 48.2% from 2015 to 2019. But the overhead of selling a $50,000 painting is essentially the same as a $5 million painting, and the profit, if any, is much less.

A few weeks ago, Sotheby’s increased the buyer’s premium for lots selling for $2 million or less to 28% from 27% for lots selling for $1 million or less. This may help area homes attract more bidders because they charge lower fees in this price range. Rago/Wright’s buyer’s premium is 22% on lots worth more than $1 million; Bonhams’s is 21%, ranging from $1 million to $6 million; Freeman’s is 21%, on $1 million and above; and Doyle’s is 21%, ranging from $1 million to $4 million. Heritage does not have a tiered buyer’s premium, but offers different rates for different categories. Buyer premiums were 22% for coins, comics and sports memorabilia, and 25% for art, entertainment and historical collectibles.

Another factor that contributes to this are third-party auction sites such as Invaluable and Auction Technology Group’s three sites (LiveAuctioneers, Proxibid and The Saleroom), which take a cut of these profits. These aggregators help smaller auction houses reach a wider pool of bidders, but since ATG solidified its control of the industry through its acquisition of Proxibid in 2020 and LiveAuctioneers in 2021, they have become “vultures preying on us,” the head of one regional auction house told me last year. Some auction houses pass on “third-party fees” to customers who choose to bid through these sites; at Heritage, the fee is 5%.

A variety of mid-market companies have weathered these conditions with varying degrees of success. Last year, Dallas-based Heritage Auctions achieved $2.16 billion in sales across 50 categories, marking its fourth consecutive year of record-breaking sales. They are now the third largest auction house in terms of total sales after Christie’s and Sotheby’s, leapfrogging Phillips and Bonhams for the position. Known primarily as a collectibles auction house, Heritage is benefiting from a boom in the category as collectors turn nostalgia into an asset class. Last year’s top Heritage lots included Superman One (1939) sold for $9.12 million, and an Upper Deck Double Logoman autographed card signed by Michael Jordan and Kobe Bryant sold for $12.93 million. But don’t underestimate the legacy of the fine and decorative arts. They also sold Norman Rockwell’s So you want to meet the president (1943) sold for $7.25 million, and a Fabergé cloisonné punch bowl sold for $750,000.

Heritage announced earlier this month that Aviva Lehmann, an American art expert and 13-year Heritage veteran who last year led the auction house’s largest-ever sale of American art at $14.76 million, has been appointed vice president of fine arts, a big step for the auction house where 12 of its 13 managing partners are men. Meanwhile, Nick Nicholson has been promoted to deputy chairman of the decorative arts department. These appointments demonstrate Heritage’s intention to expand into these markets in a meaningful way. According to the Bank of America report, buyers in the Western United States, centered in California, will account for the largest share of U.S. art purchases in 2025, reaching 35%, due to large purchases under $50,000, followed by the Southeast region, with Texas and Florida accounting for 28%. For lots worth more than $1 million, the share of buyers in the West rose from 15% in 2020 to 31% last year.

The Rago/Wright network, which consists of five properties, had record sales of $130 million last year. New Jersey-based Rago and Chicago-based Wright merged in 2020, then added LA Modern Auctions and Toomey & Co. in the following years. These mergers bring more resources and larger teams, which allows them to compete for higher-value properties. Chief executive Richard Wright said their focus was on tightly curated auctions and single owner sales. They focused on collections in the roughly $500,000 to $1.5 million range, such as Donald Hecht’s collection of George Ohr ceramics, which more than doubled last year’s estimate of $1.08 million, and the Michael Jefferson collection of art and design, which reached $1.5 million. With no trusts and estates department, they often sell collections collected by former clients, which is testament to their strong reputation. While primarily known for design, Wright reports that they are growing in the fine arts space, with sales in that category set to exceed $50 million this year. They’ve also expanded their collectibles department under the leadership of prodigy Travis Landy, who joined in 2024 and launched Landry Pop Auctions under the Rago/Wright banner.

Bonhams and Freeman’s have had a rocky road ahead, with high turnover in senior management. Bonhams, which had sales of $970 million last year, is preparing for a reset. Last fall, private equity firm Epiris, which once owned the British auction house, handed over ownership to its main creditor, Pemberton Asset Management. as financial times As mentioned above, as the art market declines in 2024, Epiris’ debt repayments surge. Then-CEO Chabi Nouri, who had led luxury brand Piaget, was clearly not the right person to steer the ship through the storm. In the handover to Pemberton, almost all of the company’s previous leadership was beheaded, with the exception of Swiss chairman Hans-Kristian Hoejsgaard. New UK-based chief executive Seth Johnson joins from billionaire Michael Spencer’s family office IGPL. Bonhams has lost a lot of talent in the turmoil, but according to one employee, there is “cautious optimism” about new leadership. With its new 42,000-square-foot Manhattan flagship store, Bonhams is positioning itself to compete for higher-value properties and collectibles. But everyone in the auction industry wants to know what happened to Pemberton, the financial firm that eventually put the asset on its books but is not in the business of operating an auction house.

Meanwhile, Chicago-based Leslie Hindman Auctioneers and Philadelphia-based Freeman’s are merging in 2024 under executive chairman Jay Krehbiel, and Freeman’s recently completed a rebrand. Their sales last year were $119 million, including $7.9 million of historic American artifacts related to Abraham Lincoln, the highest total for a single auction in the company’s history. It remains to be seen whether they can maintain that momentum after CEO Alyssa Quinlan recently resigned after three years in the job to join financial services company Northern Trust. According to Freeman, Krabiel is directing day-to-day operations.

The mid-size market is in a period of transformation, with smaller brands starting to consolidate and find their niche in a crowded field, but ultimately all brands are competing for many of the same goods. But there is no doubt that demand is there on the buyer’s side if housing companies can figure out how to prevent shrinking profits amid rising costs and aggressive trading.