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Condominiums conversions are back … in a few places. Developers are buying hundreds of millions of dollars’ worth of properties to convert to for-sale condominium housing, but only in a handful of cities.

“Two-thirds of these conversion projects are in Manhattan,” says Ben Thypin Director of Market Analysis for Real Capital Analytics.

Developers paid $1.1 billion for buildings that they converted into condominiums in 2013. That’s the highest volume of conversion sales since 2006, when $1.5 billion in properties sold to condo converters. However, it’s still much less than the peak year of 2005, when $4.1 billion in conversion properties sold, according to data from Real Capital Analytics.

This year should be even busier for condo conversion sales. By mid-May, condo developers had already bought $507 million in properties to convert to condominiums.

“2014 is on pace to match or surpass 2013 volume,” says Thypin.

But nearly all of the condominium conversion activity is happening in very short list of cities. About two-thirds of the properties bought by condo converters in 2013 were in Manhattan—and because Manhattan property is so expensive, those deals accounted for 75 percent of the $1.1 billion in transactions. The rest of the properties bought by condo converters were in Washington, D.C, Brooklyn and San Francisco.

These places have more in common than just sky-high property values and strong market acceptance for condominiums. They also have lots of attractive, older buildings that can potentially be converted, including architecturally significant office buildings or historic hotels.

Potential condo buyers are willing to pay more for condo conversions of these attractive old buildings compared to conversions of garden apartment communities so there’s less of a price difference between newly constructed condominiums in places like New York City compared to condominium conversions.

Condominium converters are not active so far in South—though a large number of new construction projects are underway. That’s a big contrast to 2006, when developers turned a huge number of garden apartment communities into condominiums in South Florida. Demand for condominiums was so high then that these conversion projects didn’t worry much about competition from other new condos or even single-family homes nearby.

Also, back in the boom years, condominium developers in New York City bought up rent-stabilized properties to flip to condominiums. Many of these projects ran into trouble. Some developers found rent stabilization law more challenging than they expected. “I think everyone’s kind of wary of doing something like that now,” says Thypin.

Condo converters are pushing up the prices of the properties that they buy. That’s because they can simply pay more than conventional property buyers. “Condominium conversions allow developers to capture gains much more quickly than buying and holding a property since the returns come in as condos are sold,” says Thypin.

Demand is high nationwide for condominiums. Seasonally adjusted condominium and co-op sales increased 7.3 percent in April, and were unchanged from the same period a year ago. The median condominium/co-op price increased again to $205,500 in April, up from a downwardly revised $198,300 in March and was up 8.3 percent from April 2013, according to the National Association of Home Builders.

This article was republished with permission from National Real Estate Investor.