A condominium building under construction near the Lloyd District has switched to rental apartments weeks before its scheduled opening.

The developer of the Twenty Twenty building at 2020 N.E. Multnomah St. chalked up the switch to a softer real-estate market that had emerged in the two years since construction began.

It’s a move reminiscent of the end of Portland’s condo boom in the 2000s, when thousands of under-construction condo units switched to rentals after sales came to a stop.

But today’s market is fundamentally different. The broader real-estate market in Portland remains active, albeit slower than recent years. Meanwhile, condo construction never really came back. The seven-story, 162-unit Twenty Twenty building was the only large condo building of its type under construction in Portland when it switched to rentals.

The project also is in an unusual location for luxury condominiums, trading the Pearl District or South Waterfront for a residential pocket east of the Lloyd District on a lot that backs up to Interstate 84. It aimed for a lower price point than buildings in the more centrally located high-rise districts.

The housing market generally slowed in 2018, with more homes for sale and less competition between buyers. That included an even bigger uptick in the number of existing high-end condominiums listed for sale by their owners.

As a result, PHK Development founder Patrick Kessi said pre-sales at the building were slower than expected, given the success of Pearl District buildings that opened at the time construction was getting underway. He declined to say how many of the units had pre-sold.

“Now, in 2019, the buyers are a little skittish,” said Kessi. “The market’s just not quite ready for new condos right now.”

Kessi’s company had also targeted Asian investors as potential buyers, but the strategy didn’t pan out.

“We had some investor interest, but most of our interest was local,” he said.

Sean Becker, a real estate broker who specializes in condominiums and has his office in the South Waterfront, said Portland is entering a buyer’s market for condominiums. That’s particularly true in the middle-market price points where many of Twenty Twenty’s units fall.

“We’re all in kind of a reset right now,” Becker said. “I don’t know if there’s any one easy answer about it, but the condo market has definitely kind of flattened out.”

The rental market also has slowed, largely because of a raft of new buildings all opening their doors at the same time, many offering discounts and other incentives to lure renters and fill up vacant units faster. That slowdown has hit high-end apartment buildings the hardest.

But apartment developers and owners remain bullish on Portland in the long term, said Greg Frick, a partner with apartment brokerage HFO Investment Real Estate. Some believe a city affordable housing mandate that requires rent-restricted units in new developments will slow new housing production, teeing up another apartment shortage and amping up competition between renters.

“Yes, we’ve had a lot of development, but the in-migration’s still here and the job growth’s still here,” Frick said. “There’s some softness in rents, yes. But if you take a long term view of the market, we’re still going to be undersupplied.”

The increasing competition from new apartment buildings might also be hitting condo sales, Becker said.

“Ten years ago, if you wanted to live downtown or in the Pearl District, you had to buy a condominium,” he said. “The consumer has more choices now than they ever had in urban living.”

Kessi said it’s too early to judge demand from renters. Property managers only started advertising the units for rent a few days ago.

The building is expected to open to tenants in mid-August, Kessi said.

-- Elliot Njus

enjus@oregonian.com; 503-294-5034; facebook.com/elliotnjus

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