Dalanzadgag, the capial of the south gobi aimag, is about to become the new booming city of Mongolia. The aimag is home to the largest mining projects that Mongolia will have over the next 10 years, it stands to reason that all of the mines and their service providers will need to have a base in the aimag’s administrative capital. So far, mining companies have little offices in crumbling old buildings, infrastructure projects are slow to start due to lack of funding. This is all about to change, mining companies are now investing into large scale projects to develop the city. The need for supporting corporate infrastructure is clearly critical. As the city is starting to reach the next stage of development, we stand ready to make the most of those opportunities and help our clients become the true pioneers of the Gobi.
While all parts of Mongolia are about to undergo a mining boom, the south Gobi region will be home to the largest projects in the country, primarily the Oyu Tolgoi and the Tavan Tolgoi projects. Those two projects will form the backbone of the nationwide mining boom and will contribute significantly not only to the national economy but also to the regional economy. This contribution will not only be in the form of direct investments in the region such as job creation and infrastructure development but will also incubate an enormous growth in the associated industries for suppliers to the mining industry, this will include housing, agriculture, transport, equipment supplies, manufacturing and so forth.
The region will also play an important role in the transport of goods to and from Mongolia’s main trading partner: China. It shares a large border with its neighbour with new border posts between the two nations opening up every year, infrastructure at those border posts is being constantly improved to cater for the growing amounts of trade. The main railway line to China goes through the South Gobi aimag while all the new rail projects to link T.T. and O.T. to the network will also be built in the region. Other major infrastructure projects are also slated for completion in the coming decade. Mongolia is also undergoing a tourism industry boom with ever increasing numbers of tourists coming to discover this unique country.
The South Gobi is in itself a preferred destination for tour groups wishing to ride camels, see sand dunes or witness the start of evolution with all the dinosaur fossils that litter the region. Those tourists invariably transit through Dalanzadgad and sleep there, shop there and go to see the latest Hollywood blockbuster in its new cinema, this is spurring new investments in the hospitality and services sectors of the city.
While all those projects will be happening within the region, Dalanzadgad will remain the administrative capital in the city and all deals, businesses and other projects will have offices, personnel and supply centers located there. Even by the most conservative estimates around, the South Gobi region as well as Dalanzadgad have a boom coming their way.
Why a business center & serviced apartments?
As investments floods the city, more businesses and services are establishing themselves, as is usually the case in Mongolia, private investments and enterprises are preceding the state apparatus and forcing it to invest where needed.
As those businesses arrive in Dalanzadgad, they find a dormant city that has seriously lacked in infrastructure investments over the past decades. There are currently no real office buildings (beyond the government office) and no longer term housing options for the new executive workers.
A number of companies (South Gobi Sands, Oyu Tolgoi, Eznis Airways, Ellehcor drilling, Energy Resources ) have already established small representative offices in the city but those are currently ill suited for their purposes as they are located in much older buildings and poorly represent the company’s brand image. This is limiting the pace of expansion of the city and forcing larger mining companies and their suppliers to conduct business from Ulaanbaatar.
As a growing wave of companies do try to establish themselves there, the availability of properties will dry up and prices are likely to rise exponentially. This situation is further compounded by the lack of decent housing solutions for the executive workers moving into the city. Beyond the suites of the Dalanzadgad hotel (of which there are only 4) there is nothing of a good enough standard for short to medium term workers. The Gandirs towers, supposedly the best residential real estate in the city, are falling appart (despite only being a couple of years old) and are poorly managed.
The city officers are keen to see improved corporate infrastructure within the city to both improve the image of the city but also as this will strengthen the incentives for businesses to establish their regional centers there and thus contribute to the economy. They are also equally interested in improving the quality of the housing stock of the city. As the local population gets progressively wealthier thanks to the windfall of mining activity and as considerable immigration of workers is expected to the region, demand for quality housing will rise considerably over the next 5 years. This growing demand and lack of other players in the market make this an excellent opportunity to contribute to the development of the city but also to be at the forefront of businesses making the most of the mining boom.
| Investment Facts |
| Name of project | The Dalanzadgad Business Center & Serviced Apartments. |
| Project Location | Dalanzadgad, South Gobi, Mongolia |
| Type of Project | Property Investment & Management. |
| Initial Capital Investment required | 1,2 million to 2,7 million USD depending on chosen strategy for the investment. |
| Expected length of project | 8 months to set up and 5 year of project management. |
| Expected return on investment |
Between 25% and 75% per annum. |
| Expected Payback Period | 18 to 36 Months |
| Scope of project | To either build or renovated an existing structure in order to create an exclusive but small business center with some comfortable serviced apartments in the heart of the city. |
| M.A.D. Risk Rating | 4/10 - middle to low |
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