The five-storey Premier Inn has been designed by architect Faulkner Brown.
The scheme involves repairing and remodelling a Grade II-listed former Gas Board building. Demolition of later additions to the original building will make way for the new hotel. The project is set for completion by February 2015.
GB Group has acted as developer as well as contractor and has worked with Sunderland City Council and the neighbouring University of Sunderland to bring the project forward.
Brandon Riley, hotels director at GB Group, said: “This is an exciting new hotel development and another great example of GB Group’s developer contractor capability in the hotels sector. As a group we provide end-to-end solutions and we are now in a position to move forward into construction in Sunderland.
“Working together with the University, the City Council, Premier Inn and our funding partners this exciting new development has now become a reality. However, it’s much more than just a new hotel; it’s a fantastic example of how the public and private sector can work together in partnership to achieve a common goal.”