Developers have rapidly begun buying up closed hotels en masse to convert them into new real estate and housing opportunities.
- A report from CoStar Group shows that 458 closed hotel properties were sold last year, marking nine years of consecutive increases in property sales and increasing from 160 in 2013.
- Interest has nearly doubled since 2019 alone, with post-pandemic interest skyrocketing due to redevelopers buying up used properties, Axios reports.
- These properties provide excellent opportunities for redevelopers to convert these facilities into eldercare facilities, student housing, or apartments.
- The three largest profile examples of the practice are the New York Marriott East Side on Lexington Avenue in New York City, the Dayton Grand Hotel in Ohio, and The Standard on the Sunset Strip outside of Los Angeles.
Why It’s News
As we previously reported, the real-estate market is facing multiple challenges and shifting trends at once. On one hand, the burning-hot housing market is beginning to show signs of cooling, as dropping lumber prices suggest a slowdown in new construction. On the other hand, remote work is diminishing the usefulness of valuable inner-city real estate and large office buildings, necessitating many of them being converted into apartments or hotels.
The diminishing of interstate travel during the COVID-19 pandemic has additionally created an increased supply of abandoned hotels due to loss of customers.
Redevelopers are seizing opportunities in the market, removing decrepit buildings that harm to local real estate markets and pose public safety and crime challenges to neighbors. These buildings still provide opportunities for new developments, with CoStar national director Jan Freitag telling Axios they still have “good bones” for development opportunities.