A new trend is emerging amongst Canadian condo developers. They aren’t just snapping up land; they’re also buying old hotels.

According to a report from Colliers International Hotels, more than half the sales activity in the hotel sector comes from developers buying old hotels to convert them to alternative use with a large segment going to condo units.

The report notes that there was $627 million in sales activity in the first half of 2012. This is up from $599 million in the same period in 2011. Of the $627 million, 53 per cent of the transactions were for new developments.

Colliers said that “this theme has been fuelled in part by the strength in the residential condominium market in Toronto and Calgary.” In an article in the Financial Post Alam Priani, executive managing director of Coliers Hotels notes that “we will continue to see the conversion of hotels that have a higher and better use for residential and in some cases retail.”

He went on to argue that “the good news from a supply perspective is the older product is converting which is creating less of a strain on supply. Everyone is concerned about the number of new luxury hotels opening up but the flip side is you have conversion to alternative use.”

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