The UK senior living sector has strong demographic factors in its favour, but it isn’t immune to the problems besetting real estate more generally: rising interest rates, spiking construction costs and a cost-of-living crisis among its consumers.

To succeed in this environment, it pays to take a lesson from a musical innovator.

“I talk about my Beyoncé strategy. We’ve been sent a whole truckload of lemons, so we’ve got to make some lemonade,” Birchgrove CEO Honor Barratt told the audience at Bisnow London’s Later Living: Meeting Residents’ Desires event, held at One Birdcage Walk.

Birchgrove buys and builds senior living schemes and is an exception to the general market model in the UK in that it offers units for rent rather than for sale. It counts three existing facilities, two in Surrey and one in Kent, and a pipeline of six more in Surrey and London. And it has a £200M joint venture with pension fund investor M&G to expand in the sector.

The rise in mortgage rates is slowing the pace of sales for new-build housing developments. That is providing an opportunity for it to buy in bulk from housebuilders at compelling prices, Barratt said.

“If they've got 70 units coming to market this year, which they know they're not going to be able to shift, we’re buying turnkey developments almost at [the price it cost to build them],” she said. “They’re saying, ‘Do you want to take this tower off me because I don’t know how I’m going to fill it,’ which is a joy. So that's lemonade.”

The ability of her customers to pay rent is being helped to some degree by the macroeconomic environment, Barratt said. Retirees can sell their homes, put the money into a savings account yielding 4% to 5% and pay rent out of the interest.

“The kids like that because it means the pot isn’t diminishing,” she said.

Barratt flagged a survey showing that 67% of real estate investors want to be in the senior living sector before 2028, but she said that capital raising remains sluggish because of the same high interest rates helping retirees pay their rent. “Bills included” is now the No 1 search term on Google when it comes to the UK residential market, she said, indicating that the inflation-induced cost-of-living crisis is starting to impact the residential sector.

Other speakers at the event also said they foresee an opportunity to capitalise on problems in other sectors.

“It could be the buying opportunity of a generation, with office prices down, 20%, 30%, 40%, 50%, down to levels we’ve not seen since the GFC,” Fore Partnership Managing Partner Basil Demeroutis said.

That is offering opportunities for developers to buy city centre office schemes and convert them to senior living properties.

In one example, care home operator Medici Lifecare received planning consent from Westminster Council to turn Dean Bradley House, an office and retail property on Horseferry Road in Victoria, west London, into a 112K SF care home facility or healthcare clinic.

“You can buy at £200 a SF in central London, £400 a SF in Zone 1,” Demeroutis said. “I’m not saying the [Marks & Spencer] on Oxford Street should be converted into a care home. But we need to talk about it, to reimagine what existing stock looks like and what high street or disused real estate could be converted into in our urban centres.”