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Flexspace in the “new normal”



Flexspace in the “new normal” 1

By Julian Cooper, managing director at Clarendon

The way we see the office has drastically changed over the past six months, and the disruption has highlighted the value of innovation in workplace design. Trends seen before the pandemic have accelerated. A report in 2018 on the growth of flexspace predicted that by 2030, 30 per cent of office space would be in this form. At the time, this was already being deemed a ‘revolution’, though naysayers warned it had yet to stand the test of time or a recession. Some have called the pandemic a “trial by fire” for these spaces. The sector as a whole appears to be robust thanks to an increased number of businesses considering flexspace for the first time.

For those yet to utilise flexspace, it might be unclear how valuable it has proven to be in recent months. Investors, developers, landlords, and managers are all fighting to adapt to new regulations and demands from clients, and flexspace is offering the agility they require. Balancing a managed and limited return to the office with continuing home working is the highest priority challenge for many employers and workplace managers. Doing so demands the space and resources to create a workplace which enables building users to socially distance and capacity to maintain a high degree of hygiene. However, with limited numbers of workers returning to the traditional office and many unable or unwilling to commute long-distances, re-opening entire buildings can pose a logistical and financial challenge. Re-opening offices at all may feel like a risk and those organisations which have been dealt a financial blow may find rent an unwelcome cost for little return.

Why flexspace?

The rise of flexspace has been well documented in recent years. Diversifying the market through the offering of workplaces as a service has been central to keeping landlords and their portfolios competitive. To outsiders, the rise may have seemed like a trend rather than an evolution of the workplace at first; fashionable design which appeared to place form over function accompanied the astronomical rise of names such as WeWork. While the exponential growth of some companies may have placed them on rocky ground, many smaller operators have followed more sustainable growth trajectories to provide some of the best designed offerings on the market. Flexspace has undeniably become a fixture of the market and is rapidly becoming a mainstay of many corporate real estate portfolios.

Organisations from SMEs to largescale internationals continue to benefit from flexspace. Low capital expenditure and shorter leases reduces the financial risk for smaller enterprises, which is particularly valuable in unpredictable times. These same features have long made expansion and downsizing a far simpler process. These spaces also offer additional services and facilities that may not be available in traditional smaller office spaces, such as access to community resources and local networks. With novel demands on the office and many working from home, landlords must work harder than ever to remain competitive, leading to innovation in flexspace offerings.

Some people may make the mistake of assuming these spaces are cookie cutter co-working spaces, or that corporate branding and culture has no space. The truth is that many flexible spaces are quite the opposite. Larger organisations such as banks, which require a high degree of security and privacy, are renting out vast private floor spaces within serviced buildings. Flexspace is often designed for optimal working practices with furniture and facilities already installed, but with the freedom for occupants to add their own design. Having the core elements of the office in place frees office managers to focus on the details which make their spaces unique.

The market for these spaces is rapidly tiering and forming niches. There is a space for every organisation whether you are looking for stunning design, cutting-edge technology, or a blank canvas for your organisation to express itself.

We’re also seeing operators offer tailored packages when it comes to booking space. Understanding that many companies may not require space every day of the week, ‘timeshare’ options are starting to appear. Essentially, these packages allow tenants to book space on an ad hoc basis or reserve the same day(s) each week. It’s another indication of how operators are attempting to stand out from the crowd.

With such diversity, there is no need to compromise when searching for an operator in the right area, with the right facilities, and whose values and culture align with that of your own organisation and working practices.

Flexspace during the pandemic

The features already leading the flexspace revolution have proven even more valuable in these trying times. This might seem surprising. After all, this was the revolution in office space which brought people together, yet we have found ourselves suddenly thrust into a world which demands we refrain from interaction. However, as office use continues to prove unpredictable over the coming months, the flexibility to vary space use and facilities will be invaluable. Facilities such as contactless access and cleaning provisions will also be a central means of ensuring the safety of employees. Working with a specialist in flexspace is the most efficient way to find somewhere which provides for these needs at the best price.

While the approach to safety and hygiene is redefining the way facilities managers see the office, months of working from home and self-isolating have equally shaped the way in which employers see their own workspaces. The “new normal” we will see resulting from the turmoil is still unclear, but many throughout the industry are expressing their thoughts on the matter.

Julian Cooper

Julian Cooper

There are numerous surveys which suggest that the greater flexibility and lack of a commute when working from home are benefits that employers are hoping to hold on to. A number of surveys have suggested, to differing degrees, that employees want to remain working at home for at least part of the week. However, homeworking certainly doesn’t suit everyone and comes with its own drawbacks.

Many people do not have the space or furniture, and home office set-ups are not designed to support workers’ health. Homes may not provide the quiet needed to focus or they can leave people feeling lonely. ‘Blended solutions’ which enable employees to work some days from managed spaces, some on clients’ premises or at a central office, and others from home, may well be the go-to solution in the coming months and years. As employers trial differing degrees of home working or satellite offices which reduce commutes, flexspace provides the perfect testing ground.

Big names including Google, Microsoft, Nike, and Siemens have declared their intention to utilise flexspace for these very reasons. Due to this demand, flexspace providers around the country are offering a diverse and comprehensive service. There are reports of more offices opening or planned to open and with travel limited, they are quickly spreading from city centres to suburbs and smaller towns.

Finding the perfect space

The variety of flexspace on offer can be overwhelming, which is why many organisations choose to work with experts to find their space. Whichever way you choose to go, it’s hugely valuable to consider what an ideal space would provide. Consider the benefits and costs of working from both the office and at home and use these to guide you on how flexspace can help. It might be as simple as searching for a space with short-term commitment in the right area. Design or a basis on which to build a space which feels like home, additional security features and facilities, networking opportunities, and agile working areas are all features which should smooth the return from home working.

While flexible working sounds immediately promising in volatile times, examining what flexibility can provide can guide the core elements of the search for flexspace. Are these spaces to trial novel ways of blended working, to reduce commute times, or to cut costs? The central drive for flexspace will guide the search for the perfect office.

Location and the type of space available come under scrutiny due to the pandemic. Reducing commute-time and exposure to others on the way to the office can keep all employees safe and reduce stress levels. Office design which enables social distancing, one-way systems, and regular deep-cleans provides another level of protection. Many employers may also want to implement their own safety practices and put in place signage which keeps building-users up to date on precautions. Finding a space which makes this a simple process can streamline the return to the office.

Flexspace is often a more cost-effective option than moving into an unserviced office as one monthly bill covers everything, providing excellent value for money. What is included in the cost may vary and include rent, services, utilities, security, IT, office furniture, and management. For SMEs looking to minimise cost in the short-term, looking for limited service provision may be helpful. Larger organisations hoping to grow and evolve through the pandemic might find tried-and-tested managed services which support their employees save time and resources required to develop their own.

The final consideration when searching for flexspace is the operator itself. It’s important for the tenant to maintain a close working relationship with the operator to negotiate the details on building management and additional services. Many businesses choose to work with a specialist not only to find flexspace, but to manage it on their behalf.

Adding flexspace to your CRE portfolio

Flexspace and traditional leases are not an either/or. Many enterprises have chosen to add flexspace to their CRE portfolio as a means to diversify and offer more services to staff. Previously, this has had the benefit of attracting the best talent but it has proved its worth this year for other reason.

Many organisations which have been hit hard by the pandemic have been forced to go through the process of losing or furloughing all but a core team of staff. In much the same way, maintaining a core central office through which to work with clients and bring together staff is not likely to disappear. The addition of flexspace to cater to employees working further away or on shorter-term contracts, as well as to trial scaling up or entering new markets at little to know risk will be vital in the recovery of many organisations. CRE portfolios may require fundamentally rethinking in the new normal of post-COVID. Where once, CRE could make up to 12% of company costs, a shift towards flexspace and home working might enable organisations to reduce this outgoing significantly.

We are facing untested waters in the coming months and years but this need not be a reason for concern. Disruption can be the trigger for evolution and flexibility, resilience, and growth must all play their role in the process.


Euro zone business activity shrank in January as lockdowns hit services



Euro zone business activity shrank in January as lockdowns hit services 2

By Jonathan Cable

LONDON (Reuters) – Economic activity in the euro zone shrank markedly in January as lockdown restrictions to contain the coronavirus pandemic hit the bloc’s dominant service industry hard, a survey showed.

With hospitality and entertainment venues forced to remain closed across much of the continent the survey highlighted a sharp contraction in the services industry but also showed manufacturing remained strong as factories largely remained open.

IHS Markit’s flash composite PMI, seen as a good guide to economic health, fell further below the 50 mark separating growth from contraction to 47.5 in January from December’s 49.1. A Reuters poll had predicted a fall to 47.6.

“A double-dip recession for the euro zone economy is looking increasingly inevitable as tighter COVID-19 restrictions took a further toll on businesses in January,” said Chris Williamson, chief business economist at IHS Markit.

“Some encouragement comes from the downturn being less severe than in the spring of last year, reflecting the ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year.”

The bloc’s economy was expected to grow 0.6% this quarter, a Reuters poll showed earlier this week, and will return to its pre-COVID-19 level within two years on hopes the rollout of vaccines will allow a return to some form of normality. [ECILT/EU]

A PMI covering the bloc’s dominant service industry dropped to 45.0 from 46.4, exceeding expectations in a Reuters poll that had predicted a steeper fall to 44.5 and still a long way from historic lows at the start of the pandemic.

With activity still in decline and restrictions likely to be in place for some time yet, services firms were forced to chop their charges. The output price index fell to 46.9 from 48.4, its lowest reading since June.

That will be disappointing for policymakers at the European Central Bank – who on Thursday left policy unchanged – as uncomfortably low inflation has been a thorn in the ECB’s side for years.

Factory activity remained strong and the manufacturing PMI held well above breakeven at 54.7, albeit weaker than December’s 55.2. The Reuters poll had predicted a drop to 54.5.

An index measuring output which feeds into the composite PMI fell to 54.5 from 56.3.

But despite strong demand factories again cut headcount, as they have every month since May 2019. The employment index fell to 48.9 from 49.2.

As immunisation programmes are being ramped up after a slow start in Europe optimism about the coming year remained strong. The composite future output index dipped to 63.6 from December’s near three-year high of 64.5.

“The roll out of vaccines has meanwhile helped sustain a strong degree of confidence about prospects for the year ahead, though the recent rise in virus case numbers has caused some pull-back in optimism,” Williamson said.

(Reporting by Jonathan Cable; Editing by Toby Chopra)

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Volkswagen’s profit halves, but deliveries recovering



Volkswagen's profit halves, but deliveries recovering 3

BERLIN (Reuters) – Volkswagen reported a nearly 50% drop in its 2020 adjusted operating profit on Friday but said car deliveries had recovered strongly in the fourth quarter, lifting its shares.

The world’s largest carmaker said full-year operating profit, excluding costs related to its diesel emissions scandal, came in at 10 billion euros ($12.2 billion), compared with 19.3 billion in 2019.

Net cash flow at its automotive division was around 6 billion euros and car deliveries picked up towards the end of the year, the German group said in a statement.

“The deliveries to customers of the Volkswagen Group continued to recover strongly in the fourth quarter and even exceeded the deliveries of the third quarter 2020,” it said.

Volkswagen’s shares, which had been down as much as 2%, turned positive and were up 1.5% at 164.32 euros by 1158 GMT.

Sales at the automaker rose 1.7% in December, at a time when new car registrations in Europe dropped nearly 4%, data from the European Automobile Manufacturers’ Association showed.

Like its rivals, Volkswagen is facing several challenges due to the coronavirus pandemic as well as a global shortage of chips needed for production.

It also sees tough competition in developing electrified and self-driving cars. The merger of Fiat Chrysler and Peugeot-owner PSA to create the world’s fourth-biggest automaker Stellantis adds to the pressure.

Volkswagen said on Thursday it missed EU targets on carbon dioxide (CO2) emissions from its passenger car fleet last year and faces a fine of more than 100 million euros.

The group is expected to release detailed 2020 figures on March 16.

($1 = 0.8215 euros)

(Reporting by Kirsti Knolle; Editing by Maria Sheahan and Mark Potter)

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Global chip shortage hits China’s bitcoin mining sector



Global chip shortage hits China's bitcoin mining sector 4

By Samuel Shen and Alun John

SHANGHAI/HONG KONG (Reuters) – A global chip shortage is choking the production of machines used to “mine” bitcoin, a sector dominated by China, sending prices of the computer equipment soaring as a surge in the cryptocurrency drives demand.

The scramble is pricing out smaller miners and accelerating an industry consolidation that could see deep-pocketed players, many outside China, profit from the bitcoin bull run.

Bitcoin mining is closely watched by traders and users of the world’s largest cryptocurrency, as the amount of bitcoin they make and sell into the market affects its supply and price.

Trading around $32,000 on Friday, bitcoin is down 20% from the record highs it struck two weeks ago but still up some 700% from its March low of $3,850.

“There are not enough chips to support the production of mining rigs,” said Alex Ao, vice president of Innosilicon, a chip designer and major provider of mining equipment.

Bitcoin miners use increasingly powerful, specially-designed computer equipment, or rigs, to verify bitcoin transactions in a process which produces newly minted bitcoins.

Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co, the main producers of specially designed chips used in mining rigs, would also prioritise supplies to sectors such as consumer electronics, whose chip demand is seen as more stable, Ao said.

The global chip shortage is disrupting production across a global array of products, including automobiles, laptops and mobile phones. [L1N2JP2MY]

Mining’s profitability depends on bitcoin’s price, the cost of the electricity used to power the rig, the rig’s efficiency, and how much computing power is needed to mine a bitcoin.

Demand for rigs has boomed as bitcoin prices soared, said Gordon Chen, co-founder of cryptocurrency asset manager and miner GMR.

“When gold prices jump, you need more shovels. When milk prices rise, you want more cows.”


Lei Tong, managing director of financial services at Babel Finance, which lends to miners, said that “almost all major miners are scouring the market for rigs, and they are willing to pay high prices for second-hand machines.”

“Purchase volumes from North America have been huge, squeezing supply in China,” he said, adding that many miners are placing orders for products that can only be delivered in August and September.

Most of the products of Bitmain, one of the biggest rig makers in China, are sold out, according the company’s website.

A sales manager at Jiangsu Haifanxin Technology, a rig merchant, said prices on the second-hand market have jumped 50% to 60% over the past year, while prices of new equipment more than doubled. High-end, second-hand mining machines were quoted around $5,000.

“It’s natural if you look at how much bitcoin has risen,” said the manager, who identified himself on by his surname Li.

The cryptocurrency surge is affecting who is able to mine.

The increasing cost of investment is eliminating smaller players, said Raymond Yuan, founder of Atlas Mining, which owns one of China’s biggest mining business.

“Institutional investors benefit from both large scale and proficiency in management whereas retail investors who couldn’t keep up will be weeded out,” said Yuan, whose company has invested over $500 million in cryptocurrency mining and plans to keep investing heavily.

Many of the larger players growing their mining operations are based outside of China, often in North America and the Middle East, said Wayne Zhao, chief operating officer of crypto research company TokenInsight.

“China used to have low electricity costs as one core advantage, but as the bitcoin price rises now, that has gone,” he said.

Zhao said that while previously bitcoin mining in China used to account for as much as 80% of the world’s total, it now accounted for around 50%.

(Reporting by Samuel Shen and Alun John; Editing by Vidya Ranganathan and William Mallard)

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