Airbnb boom drives up Nairobi rents by 10 per cent, leaves long-term tenants struggling for space – report

A new report by global property consultancy Knight Frank has revealed that the rapid growth of short-term rentals in Nairobi’s estates has pushed rents up by 10 per cent, leaving long-term tenants competing with Airbnb visitors for limited housing units.

According to the report, about 15 per cent of homes in mid and high-end neighbourhoods have shifted to short-let platforms, squeezing traditional renters.

“About 15 per cent of Nairobi’s housing units have shifted to short-term rentals, driving a 10 per cent rent increase over two years as residents are now competing with this new demand,” reads the report.

Beyond the inconvenience of constantly changing neighbours, the trend is affecting the broader accommodation market. Airbnb, which allows homeowners to rent entire properties or spare rooms, is part of a wider sharing-economy shift that has disrupted transport, finance, freelance work and food delivery by linking consumers directly to service providers.

The company is now expanding beyond lodging to offer chef-cooked meals, spa treatments, hair appointments and personal training. In May, Airbnb unveiled a major redesign to make it easier for users to book these services, a move it expects will generate more than Sh129 billion in revenue over the next three to five years, according to chief executive Brian Chesky.

Meanwhile, Nairobi’s mid-sized hotels are feeling the pressure. A Central Bank of Kenya (CBK) survey of hotel executives last November found that guests increasingly opt for cheaper Airbnb-style accommodation for both conferences and leisure trips.

“Respondents cited that forward bookings are being hindered by weak consumer purchasing power, ongoing rains, year-end business slowdown, inflated costs at the hotel due to commissions charged on online bookings, and increased competition from Airbnbs,” CBK said.

Analysts say the combination of rising rents, limited long-term housing, and hotels losing guests to home-shares indicates a structural shift in Nairobi’s accommodation market, with short-term rentals emerging as a major force shaping both housing and hospitality sectors.

Despite the pressures, Nairobi’s prime residential market continues to demonstrate resilience. The report notes that the Kenyan prime residential sector recorded stable growth in the first half of 2025, with the sales price index rising 5.63 per cent year-on-year to June, slightly below the 6.58 per cent growth seen in the same period of 2024. Prime residential rents also maintained steady growth, increasing 7.96 per cent, closely matching the 7.98 per cent rise in 2024.

“The market continues to benefit from constrained supply, as developers increasingly focus on high-density, low- and middle-income segments. This scarcity has helped sustain price resilience for prime properties, despite broader economic challenges,” reads the report.

However, it notes that the Finance Act 2025 removed preferential tax provisions for expatriate workers, a key tenant group, which is expected to introduce some affordability pressures. Even so, properties vacated under these conditions have been quickly reoccupied, highlighting strong market absorption.

Additionally, approved building plans for the first four months of 2025 show significant growth, with total approved values reaching Sh70 billion, up over Sh10 billion year-on-year. Residential developments accounted for Sh54.2 billion, or 77 per cent of the total. The lending environment has also gradually improved, with commercial bank credit to the private sector growing 2.0 per cent in May 2025, following earlier contractions, supported by declining lending rates, which averaged 15.28 per cent in June compared to 16.89 per cent in December 2024.

Looking ahead, the report notes that the establishment of three additional UN headquarters in Nairobi by late 2026 is expected to boost demand for premium housing, particularly from new expatriates, likely exerting upward pressure on prices. Prime estates such as Muthaiga, Karen, Kitisuru, Loresho, Spring Valley, and Lavington continue to command premium valuations due to their exclusivity, security, controlled development, and superior accessibility via the Expressway.

However, Knight Frank indicates that stringent zoning regulations limit new developments to single-family homes, keeping supply low. Only 3.53 per cent of Nairobi households are classified as upper income, making the addressable market relatively small.

High construction costs and limited new prime developments over the past decade have prompted developers to target the larger middle-class segment, which makes up 25.58 per cent of Nairobi households, through apartment developments in well-serviced urban areas.