Emerging markets are ripe for expansion

IT is social change rather than recovering business investment that is behind the improving fortunes of Regus. Over the last two years, the company has added 1m new customers – and two thirds of them are people who work from home. For many, the days of travelling to big city centre headquarters are over.

Currently, mature centres that tend to be located in mature economies contribute the most to Regus’s top line. Just ten per cent of sales in 2011 were generated by centres opened in the last two years.

The firm boasts that it is located in 94 countries, but its emerging markets footprint is small. It has just 27 centres in India compared to 135 in the UK, and 474 in the USA compared to 86 in Latin America.

It is encouraging then that of the 200 centres that Regus will open this year, around half will be located in emerging markets. Many of these economies are eschewing two crucial ingredients in the development of western economies: large office buildings and fixed line communication networks.

Take India. It has a population of 1.2bn but just 11.89m broadband connections. More Indians access the internet using their mobile phones – there are 811.59m mobile connections, according to the country’s telecoms regulator. Dreams of building a high-speed broadband network like South Korea’s have been dashed by high costs and bureaucracy.

Similar hurdles exist when it comes to building large office blocks outside of existing commercial centres like Mumbai and Delhi. For businesses in cities such as Bengaluru and Kolkata, a mixture of temporary office space and homeworking could seem more sensible. If Regus is to cash in, it needs a greater presence in emerging markets. And fast.