MADRID/LONDON: Spain’s student housing market is emerging as a magnet for global investors, drawn by soaring international enrolments and a chronic shortage of beds.

From Madrid to Barcelona, overseas buyers and developers are racing to expand in a sector where demand far outstrips supply. The number of international students in Spain has climbed 77 percent over the past decade, and sales of student housing are on track for a record year, MSCI data shows.

One landmark deal saw Canadian pension fund CPP pay 1.2 billion euros (US$1.4 billion) to acquire Livensa, a major Iberian student flats operator, from Brookfield. U.S. groups Greystar and Hines, already two of Europe’s biggest student landlords, told Reuters they are scouting for more sites.

“The fundamentals in Spain are arguably the best in Europe,” said Nigel Allsopp, head of European investment strategy at Greystar, which operates more than 5,500 student homes in the country. “The ratio of beds to students is the most landlord-friendly … growth is pretty strong. It’s obviously a very hot sector.”

Spain offers only 117,000 purpose-built student beds for about 622,000 students in need of accommodation, according to JLL. In Britain, purpose-built units cover nearly a third of the market; in Spain, it is under 20 percent.

That imbalance has spurred premium developments, often catering to overseas students who can pay upwards of €1,000 a month. Laura Teske, a 21-year-old student from Germany, pays 1,080 euros for a modern Madrid complex offering a gym, pool, and library. Local students, meanwhile, struggle. “Now it’s too difficult to find a place for less than 500 euros,” said 22-year-old film student Jose Angel Martinez, who paid 40 percent less just five years ago.

Hines said revenues at one of its Barcelona projects rose 30 percent last year, and it plans 1,700 new beds in Iberia. Stoneshield Capital aims to double its 10,000-bed portfolio in Spain and Portugal.

Prime yields on student housing are 4.5 percent in Madrid and Barcelona, compared with 3.3 percent for 10-year Spanish government bonds, CBRE said.

Spain’s appeal extends beyond returns. Its lower tuition fees and more relaxed migration rules make it attractive compared to the U.S. or U.K., where stricter immigration measures have curbed student visas. A third of Spain’s 150,000 foreign students attend private universities, with nine in ten business school students from abroad.

“Compared to my hometown, Los Angeles or New York, and certainly compared to London, Barcelona is quite affordable,” said American MBA student Claire Zeng.