Jessica Bowles, Director of Strategic Partnerships and Impact at Bruntwood SciTech, discusses the rising trend of local authority pension fund investment in property, and the potential to diversify their investment portfolios to stimulate economic growth.

Local authority pension scheme investment strategies are rarely described as innovative and are justifiably guided by the need to manage financial risks. They need long-term stable returns and have tried and tested ways of achieving this. However, they also represent huge investment potential and have a far greater role they could play in growing local economies. There is an opportunity, with the right partners and platform, to invest in the property assets that support the UK’s high growth sectors – i.e. life sciences and technology – and large-scale regeneration programmes that have the ability to make significant changes on the ground locally.

We all know that the UK has a chronic productivity problem, high levels of debt and struggling public services. Without increased economic growth we cannot deal with these challenges and the surest way to do this is to drive the innovation economies in our regional cities. By supporting our cities to better leverage their science and technology assets to foster innovation and attract new businesses they can act as catalysts for broader economic improvement. And this is where public-private partnerships can come into their own.

Put simply, unless we look at new sources of investment in local places to drive their economies we will continue to see low productivity, slow growth and lack of funding for public services. The good news is, we are now starting to see innovative partnerships between local government pension schemes and the private sector emerging, utilising both their strengths and patient capital to ensure that projects deliver both commercially and for the community. These collaborations leverage private expertise and resources to mitigate risks and develop long-term strategies for sustainable economic growth, creating a structured approach that delivers financial returns and fosters lasting community benefits.

This is something I have seen working first hand. Last year, Bruntwood SciTech welcomed the Greater Manchester Pension Fund into its joint venture, marking the first time a local government pension scheme made a direct and active investment into a UK-wide science, tech and innovations specialist property platform. By facilitating patient capital-backed investments into local property markets, this platform showcases how local authorities can leverage private sector expertise to stimulate regional growth through improved support for regions’ innovators and entrepreneurs.

This approach will only become more valuable post-general election, where we are likely to see greater devolution of powers and responsibility to local areas to develop their economic strategies and create partnerships to deliver them using all the assets at their disposal.

Overcoming the perceived challenges

The primary hurdle for local government pension schemes considering property investment is the perceived risk of partnering with the private sector. Historically, there has been legitimate concern about whether these partnerships will genuinely transfer risk while delivering equitable returns. Though there is significant real estate expertise within local authority pension fund managers, some may lack the expertise and resources when it comes to managing larger-scale, science and tech-focused property developments effectively, making the option to invest seem daunting.

However, recent successful models now demonstrate that with careful planning, such partnerships can effectively and securely transfer risk to capable private sector partners. This approach not only safeguards financial stability but also ensures that investments contribute positively to the local community in the long term – a win-win. By collaborating with experienced entities, local authorities can overcome these barriers and make more impactful investments.

Risk vs reward

To tackle the UK’s productivity issue, there needs to be substantial support given to local projects that are helping to supercharge the science, tech and innovation sectors, as we know this is where the real growth opportunities for the UK are.

Given the limitations of public funding, pooling the resources and capital from both the public and private sector can effectively improve economic growth. This was the rationale behind GMPF’s investment into Bruntwood SciTech.

But this strategy only works when taken with a long-term view. The key to success lies in long-standing investment and comprehensive asset management. By working closely with city regions, we attract businesses to these spaces, support their growth, and subsequently generate more jobs. This collaborative approach fosters trust and transparency to ensure local authorities receive fair returns and lasting benefits from their investments. Property investment platforms demonstrate these principles, providing a blueprint for other regions to adapt.

By creating a model that allows other UK local authority pension funds to co-invest on an asset-by-asset basis, at a regional level, or into a dedicated joint venture, we can minimise initial risk before proof of concept.

Looking ahead

The dual benefits of financial returns and community impact are making these investments increasingly attractive to pension funds seeking responsible and impactful opportunities, as local authorities can strategically allocate resources, attract investment, and develop infrastructures that support thriving communities and businesses.

But now, the onus is on private sector firms to provide viable investment opportunities and act as active, long-term partners, for local authorities.

As the UK readies itself for the upcoming election, we need to think about more innovative ways to invest in our regions. Whichever party holds the keys to Number 10 on July 5th, there will be challenges in how we invest in productivity and drive the economy forward. There is a critical need to think more innovatively about how we use the system to deliver growth in a sustainable way and create more economic activity in cities right across the UK.