PRORA, Germany—On a 2.8-mile stretch of sundrenched coastland in this small seaside town stands the remains of what was once among the Nazis’ most ambitious construction projects: Prora. The sprawling complex of nearly identical buildings was envisioned as a working-class vacation spot for up to 20,000 people before the regime put the project on hold in 1939.

Now, after decades of decay, the site operated by the Third Reich, the Soviets and the East Germans over the years is being converted into hotels and apartments. The developers’ bet: that thousands of vacationers will flock to the complex on the Baltic Sea island of Rügen, one of Germany’s most picturesque destinations.

Christa Moog, a Berlin writer, last year paid €310,000 ($337,000) for an 820 square foot apartment. She plans to move in this fall.

“I am happy to see that this building is being made into nice vacation apartments. It was always ruins,” said Ms. Moog, who also runs a literature-themed hotel in the leafy Berlin neighborhood of Friedenau. “The buildings were built in a dark, bad time. Now they are being transformed,” she said.

With Germany’s economy solid, the property market booming and interest rates near record lows, some German developers and investors are starting to look to architectural relics of the Third Reich for opportunities. From Prora’s massive resort to air-raid bunkers in Bremen and Munich, some abandoned Nazi-era buildings are finding new uses as living quarters.