The aftermath of the Brexit vote, alongside other external factors, has seen the cooling of the UK property market. Local authorities have emerged out of this uncertainty as a significant new investor class, most recently snapping up BP’s business and technology campus in Sunbury-on-Thames, one of the first large post-Brexit deals, and this is one amongst many.

So why are we seeing local authorities steadily emerging as a new investor class?

New risks are perceived with investing in UK real estate now. Many institutions are sitting on their hands, waiting to see what Brexit will actually look like and what its material impact will be. With such uncertainty, successful short to medium term strategies are difficult to call. However, local authorities have different motivations.

Budget cuts and austerity measures have seen gaping holes in spending, so local authorities are looking to plug those gaps. Income generation is therefore at the forefront of many authorities’ strategies. That is not to say capital growth is to be ignored, but local authorities can take a longer term view, taking advantage of today’s pricing and the cheap debt available to them.

Local authorities have always been proactively involved in regeneration of their own town centres - Bracknell Town Centre is a good recent example, with the council working closely alongside the developer to successfully create a new social and cultural heart for the town.

Investing directly into such schemes is a natural progression, with obvious benefits. The local authority enhances the area, directing its investment to have maximum impact for the region, bringing insight and local knowledge to bear, whilst generating long term income. Credibility of the development can be enhanced and effective active management post development can be achieved outside of the planning process.

Taking the right advice on issues which might affect local authorities, such as public procurement, State aid and disclosure of information, can lead to a structuring arrangement that is resilient in the face of local scrutiny. Although it is precisely that local focus and commitment that makes local authorities attractive investment partners.

Not all of the recent local authority forays into property investment have been local, some are pure income driven investments like distribution warehouses. However, it seems likely that regeneration investment, or some element of this, will be the trend for the foreseeable future whilst the more traditional investor hesitates.

So what is the downside and why has the Commons Public Accounts Committee warned against such direct investment? In short, risk. Local authorities understand some of the nuances of property investment, but they are not as experienced and will be heavily reliant on their commercial advisers. The range of asset classes they are investing in poses problems. Successful management of fast evolving retail led schemes is an art. The nascent residential sector continues to evolve leading to viability challenges.

Councils are well placed to take advantage of this cooling market, but the key is expertise. Perhaps we will see a trend of local authorities with the 'in-house' expertise, selling that to other authorities, much like we have in other specialised sectors like legal.

The upside to successful investment is obvious, but mistakes will have a material impact on residents and ultimately the taxpayer. The stakes are high, but it seems like for now, local authorities have a good hand.

Caroline Walker is partner, real estate at Berwin Leighton Paisner