Overview
If one district may be considered representative of modern Ulaanbaatar, it is without a doubt Sukhbaatar District. Despite being just 218 hectares in size, the area acts as the epicenter of both political and economic activity within the city.
At the district’s heart lays the prominent Sukhbaatar Square. Deriving its name from the revolutionary hero Damdin Sukhbaatar (literally translated as ‘hero of the axe’), the iconic square has been the focus of many crucial events in Mongolia. Overlooking Sukhbaatar Square to the north sits the government palace, which houses various state organs, including Mongolia’s legislature, the Ikh Khural. Renovated in 2005, the extended neoclassical façade now hosts a variety of imposing bronze tributes to the khans and generals of the country’s imperial past, the marble white building now being one of the most recognizable features of Ulaanbaatar.
On the western side of the square lies what is soon to be one of Mongolia’s most important institutions, the Mongolian Stock Exchange (MSE). Despite being separated by a road that technically marks the border of the Chingeltei district, the vast majority of Mongolian citizens consider the structure to be part of the Sukhbaatar District. The renovated children’s cinema now contains one of the world’s fastest growing stock exchanges. Despite being open for just two hours a day, the exchange is expected to play a crucial part in the Mongolian economic story in the coming years, as an influx of mining related IPOs look set to give the currently illiquid operation a new lease of life.
In addition to the MSE, much of the city’s most desirable office space is located in Sukhbaatar, which encompasses the majority of Mongolia’s Central Business District. All three of the country’s Grade A quality office units are currently situated within the district:
The MCS Central Tower, The Blue Sky Tower, and The Monnis Tower.
Retail Space
It is unsurprising given Sukhbaatar’s affluence that its economy is supported by a thriving retail sector, being the first port of call for many of the international luxury operations looking to get a foothold within the Mongolian economy.
The most exclusive retail space within the district is undoubtedly upon the first two floors of the MCS Central Tower. Similar in interior design to Hong Kong’s International Finance Center, the complex hosts many of the world’s most exclusive companies including: Mont Blanc, Hugo Boss, Louis Vuitton, Swarovski, Burberry, Ermenegildo Zegna and Giorgio Armani.
The new Naran Plaza, situated upon the Sukhbaatar side of Peace Bridge now represents one of the largest retail opportunities in the city. Spread across five floors, franchises such as Timberland, Swatch, WMF Kitchenware, Calvin Klein Jeans, L’Oreal, Samsonite, Espirit, Seiko, Puma, and are some of the latest editions to the list of international brands with operations in Ulaanbaatar.
Entertainment Industry
The Sukhbaatar District has an abundance of bars, restaurants and nightclubs designed to cater to a wide range of tastes with the majority being found along Seoul Street,.
Ulaanbaatar’s preeminent beer hall, the Grand Khaan Irish pub, is situated just opposite the Russian Embassy on Seoul Street and is renowned for its big crowds, live music, and western food.
Proximity to this institution is something of an informal benefit for any property in UB; most expats will find themselves gracing the smoke filled establishment with alarming regularity.
In the shadow of the Blue Sky Tower is the upmarket Veranda Italian Restaurant. Being one of the highest quality eateries in the city, combined with its views over the Choijin Lama Temple Museum, make it a regular haunt for expats, visiting investors and the increasingly westernized class of wealthy Mongolians.
A few hundred meters north, the 17th floor of the MCS Central Tower hosts the most exclusive bar in the city, known simply as The Sky Lounge. With breathtaking views over the south side of the city and the Bogd Khan mountain range, the bar is something of a landmark for those wishing to demonstrate the prosperity they have found upon the steppe.
The most famous nightclub in the Sukhbaatar District is The Vegas Club, situated within the Blue Sky Tower. The expat friendly establishment is famed as being one of the most expensive in the city, with the price of beer being known to be as high as $5 per bottle.
Further to the west of the district, in the heart of Seoul Street is the most famous pizzeria-come-stripclub in Mongolia, Marco Polo, famed for its persuasive employees, overpriced drinks and predominantly western clientele.
Located directly in the center of the Central Business District of Ulaanbaatar is Millies Café.
Established in 1998 by café founder / owner Millie Stoda, Millie’s Café has become an institution in Ulaanbaatar with expats and locals. Lunchtime is always crowded, and sometimes if guests have an empty chair at their table it is often filled with another guest.
Ambassadors, Ministers of the Mongolian Parliament, miners and businessmen all mingle and network over excellent coffee and good service.
Photo by Hamid Sardar / Khasar Sandag
Located directly on the west side of the Choijin Lama Museum, in back of the Blue Sky Tower, Millie’s has the ambiance and the menu of a Midwestern American diner. With always fresh ingredients, the food is consistently good and the menu features grilled chicken, burgers, pizzas, and excellent hamburgers. On a regular basis, Chef / Owner Daniel Correa Martinez and wife Desmaa spice up the menu with a Cuban sandwich or a delicious soup.
A relaxing place to discuss business over a great cup of coffee and homemade pie, with the free wifi service in the restaurant and the patio overlooking the temple, makes Millie’s Café an important destination for locals and visitors alike.
Sukhbaatar’s ‘Childrens Park’ is situated upon the southeastern portion of the Nairmdal Park, the largest park in Ulaanbaatar. Having reopened in the summer of 2011 after roughly six years of development by the Bodi Group, the amusement park is one of the most popular family destinations in the city hosting a range of attractions including theme park rides, a bowling alley, billiard tables and of course the customary bar. Although Mongolians often complain about the MNT5,000 tariff charged by the facility, to western families used to the extortionate prices of heavily branded theme parks, the facility should feel like a relatively inexpensive excursion.
Off Seoul Street, and directly south of the State Department Store is the famed Mongolia State Circus building. The newly repainted dome is an iconic sight within Ulaanbaatar, looking over one of the most central, and henceforth fastest growing districts in the city.
Established in 1940, the Mongolian State Circus housed by the structure is best known for its internationally acclaimed contortion act, however other spectacles, including acrobats, gymnasts, jugglers, tightrope walkers, clowns, and magicians all perform in the act considered to be one of Mongolia’s greatest spectacles. Unfortunately, the State Circus has not operated for many years, the building does periodically host circus performances.
University Town
Just north of the Ikh Khural (Mongolian Parliament) building is one of the largest university districts in the city. The National University of Mongolia, established in 1942, is the oldest in the country.
Originally the university was a training ground for the communist party’s executive class. Now offering a variety of competitive programs, approximately a third of university educated Mongolians graduate from the institution, with an estimated 11,000 undergraduates, 2000 graduate students, 800 faculty members, and 400 academic support staff registered at any one time.
Photo by Hamid Sardar / Khasar Sandag
The Sukhbaatar District houses the schools of Information Technology, Physics and Electronics, and Business and Commerce; and as such hosts a vibrant student population for the majority of the year. Throughout term time, the area is characterized by a flurry of activity as students move between lectures, classes, and the cheap bars that have sprung up in order to facilitate recreation on a budget. These periods place a considerable demographic strain on the housing stock of the northern area, as hundreds of students from outside of Ulaanbaatar move into the districts cheap housing and student accommodation, unable to remain living at home like their city based peers. The University of the Humanities, the Mongolian State Pedagogical University and the Mongolian National Institute of Physical Education bring in thousands of students to this area as well.
Sukhbaatar remains the central district of Ulaanbaatar, and is expected to benefit from the country’s further economic development within the country. Accordingly, the area is in a prime location to take advantage of the growth predicted within the Mongolian economy over the coming periods through real estate price appreciation.
Residential Price Trends in the Sukhbaatar District
There is currently around 175,700 of residential apartment stock in the Sukhbaatar district according to APIP/Tenkhleg Zuuch estimates. Made up of a mixture of old buildings (in areas such as the 220,000 Homes) and new projects (such as the famed Embassy District), Ulaanbaatar’s most central district remains one of its most structurally diverse.
This supply is extremely limited compared to the districts burgeoning levels of demand from expatriates and professional Mongolians alike. With both groups keen to be located as close as possible to the Central Business District, as economic growth continues, incomes rise, and more expatriates arrive looking for safe and accessible housing, demand looks set to increase well into the medium term.
These conditions have seen the average apartment price in Ulaanbaatar rapidly appreciate from just $457 psm in 2005, to $2,000 psm as of Q3 2012 according to APIP/
Tenkhleg Zuuch data. Consecutive increases in the districts property prices (with the exception of 2010) demonstrates that the demand for residential real estate in Sukhbaatar continues to outstrip supply.
Construction companies, aware of the opportunities in the market have attempted to respond to this demand by increasing their supply by as much as Sukhbaatar’s land constraints will allow. At the time of writing, there are a total of 23 developments under construction within the district, which are expected to bring 1860 extra units online within the next twelve months. 321 of these units are considered by APIP to be of an internationally luxurious standard.
This however is unlikely to be anywhere near enough to create stable price equilibrium in the Sukhbaatar residential market over the medium term. The District’s population has increased by nearly 40% over the past decade according to the National Statistics Office of Mongolia, a rate expected to be exceeded over the coming years as Mongolia’s economy grows and the city center increases further in desirability. These demographics
all-usable land within the city center having either been built upon, or currently under development. This inadequacy is well demonstrated by the fact that many of the city’s older, soviet buildings are being pulled down to make way for newer developments.
Given the increasingly salient supply limitations within Sukhbaatar, combined with growing levels of demand, investors should be confident that the sales price of residential space in Ulaanbaatar will continue to grow with at the very least the same momentum as has been witnessed over recent years.
The magnitude of this appreciation is largely connected to the proportional contribution of macroeconomic factors such as Foreign Direct Investment, and the resulting quantity of wealthy expatriates looking to move to the country for business purposes over the coming years. The APIP research teams took this into account, and has produced price forecasts accordingly. Large increases in the levels of FDI flowing into the country, underpinned by favorable conditions in the wider Mongolian economy, would leave no reason for the average property prices within the district to approach a predicted upper bound of nearly US$2,450psm by the end of 2014.
If conditions were sub-optimal, property values would most likely continue to rise. Even if FDI were to drop considerably, the commencement of mining operations within the likes of Oyu Tolgoi and the resulting spillover growth to the wider economy should be expected to sustain price appreciation in the district to a minimum level of just over $1,740psm over the next two years.
However, the actualization of such conditions is unlikely; Mongolia’s economy should continue to grow over the medium term upon the same trajectory as it has over recent years. As such, the fair price forecast for real estate within the Sukhbaatar District is calculated to be approximately $2,210psm by the start of 2015.
Investor Insight: Opportunity in the 220,000 Homes
North of Peace Bridge, and just 500 meters away from Sukhbaatar Square itself is a significant supply of existing housing stock, known locally as the 220,000 Homes (a
name as opposed to a metric). Built back in Mongolia’s Soviet Era, the structures clustered around the Bayangol Hotel represent some of the oldest apartments in the city.
Despite their age, a number of factors make the 220,000 Homes attractive investment opportunities at the time of writing. The buildings are well known for their structural integrity and build quality, the raw investment case being very similar to that facing the 40,000 and 50,000 Homes in Chingeltei.
The 220,000 Homes are however considered by the APIP research team to be better situated geographically than either the 40,000 or 50,000 homes. Although both are just five minutes off Sukhbaatar Square, the 120,000 Homes are clustered around the future International Finance Center, which should represent an influential piece of Grade A office space in the city upon completion.
This proximity has not yet been factored into the market price for buildings in the area. When the IFC project eventually becomes visible to the city, being raised above the barriers that currently guard the construction site, it is anticipated that demand for the structures will quickly expand, and the value of the properties will rapidly increase. Although a number of concerns are circulating the market as to the feasibility of the Chuang Corporations 2015 completion target for the property, when it does come online, be it two years or ten, it should release a substantial amount of under appreciated demand into the market for the 220,000 Homes.
The Luxury Market
One key area of the market that has been pushing up prices within the Sukhbaatar District has been the development of Ulaanbaatar’s luxury residential market. The Embassy District, containing many of Ulaanbaatar’s most exclusive international standard properties has seen averages prices increase from $537 in 2005, to $2500 as of Q3 2012, representing a 365% appreciation in value, outperforming the rest of the district by a wide margin.
The Embassy District, a subarea of the Sukhbaatar District, is centered between UNESCO Road and Peace Avenue. The area currently contains some of the most desirable real estate in the city, including: the Star Apartments, The Regency Residence and The One Residence, whilst projects currently under construction include a new Mon House Development, Embassy Tower (Bodi Group’s serviced apartment and suites), Tsetsens Diamond, and the multi-use Olympic Residence.
The demand schedule facing such exclusive properties looks set to expand in line with the rest of demand within the Sukhbaatar District over the coming periods, if not at a faster pace. Five years ago, it was foreign investors, and expatriates looking for accommodation who formed the driving force behind Ulaanbaatar’s luxury real estate market. Today, as the spoils of FDI and resource extraction have created a new, and prosperous native social grouping, it is Mongolians who are increasingly willing to place their money into luxurious real estate assets. For many of these domestic investors, properties in Sukhbaatar provide the perfect combination of social capital, low risk, and potential financial reward.
Investor Insight: Demand for the Olympic Residence
Mongolian Properties Olympic Residence provides a good example of the levels of demand facing high-end real estate assets in Ulaanbaatar at present.
Situated directly next to the Continental Hotel, The Olympic Residence is still under construction, with its concrete skeleton 90% completed. However despite still being off-plan, 70% of the residential units in the building have currently been sold, with prices reaching levels as high as $5,600 psm. Over 80% of these units have gone to high net worth Mongolian citizens, with a number of individuals buying two or three apartments each.
Views over the Bogd Khan mountain, the centrality of the structures location to the Central Business District, and the inherent status that comes with the ownership of such exclusive real estate, has made the opportunity difficult to refuse for many Mongolian’s looking for obvious examples of their success and prosperity. Many older Mongolian’s, with no intention of moving from their large gated homes in Zaisan still find themselves unable to ignore the property, buying small investments in order to store their wealth, whilst allowing their post-adolescent children to use the apartments as a second home when they desire to be close to the excitement
of the city center. construction industry, where the majority of now nationalized firms were state controlled, operating with no profit incentive to ensure a high quality of finish.
Twenty years later, many of these perceptions persist amongst workers in the industry. The result is that most companies that currently produce luxury space are forced to import foreign labor, often Chinese and Korean,
but increasingly from further afield. These workers are paid a premium in order to achieve internationally acceptable results.
The preference in Ulaanbaatar is to purchase high-end buildings that would appear to be western in origin. The preeminent real estate development companies across the city are well known for hiring Scandinavian architects, French interiors designers, and purchasing Italian fabrics to give their properties a competitive advantage.
Investor Insight: The One Residence
The One Residence is situated directly west of the Embassy District, a prime location for luxury real estate in Sukhbaatar. The complex’s ninety apartments, which range in size from 79 sqm. to 113 sqm. are fitted with many of the same amenities found in the city’s most exclusive apartments. Despite this, many units are not considered desirable by either the Mongolian or expatriate market.
The rooms are considered aesthetically unappealing by the standards of comparable properties in the area, with small interiors, low ceilings, and cheap interior design and limited parking.
At the time of writing there are two luxury developments under construction within the Sukhbaatar district according to APIP / TenkhlegZuuch research that are expected to come online within the next twelve months: The Olympic Residence and the GD Groups Voli Apartments.
Although the combination of these two structures will increase supply in Sukhbaatar theoretically by 159 units, this is by no means considered enough to achieve a short/
The Olympic Residence
Residence with a 100% occupancy rate.
Investor Insights: The Regency Residency
Located down upon the southern border of the Sukhbaatar District within the Embassy Area, the Regency Residence is just five minutes walk away from Sukhbaatar Square. Spread across fifteen floors, the building contains 104 luxury
Located down upon the southern border of the Sukhbaatar District within the Embassy Area, the Regency Residence is just five minutes walk away from Sukhbaatar Square. Spread across fifteen floors, the building contains 104 luxury