Lennox Otieno founded Subleasing Kenya in 2023 when the short-term rental market was highly lucrative. He started with four short stay units, two in Nairobi and two in Mombasa, at a time when few investors had ventured into the business.
“It was still a niche market. There weren’t as many hosts as there are today,” he says.
The business grew steadily at that time, largely due to international travellers. Lennox says that around 95 per cent of his clients were foreigners and Kenyans living abroad, many of whom preferred the flexibility and privacy offered by short stay accommodation to traditional hotels.
As demand grew, another revenue stream opened up: some visitors approached him, seeking help to invest in Kenya’s property market.
“They would ask me to help them buy property, furnish it, and manage it as an short stay. The business model was very sustainable back then, but within a few years, the market changed. Thousands of new hosts entered the sector, bringing competition, which caused nightly rates to go down,” he says.
Lennox says that currently, the returns are no longer what they were when he first entered the market.
This has forced him to rethink his strategy. He has shut down all his units in Nairobi and has also left Mombasa, choosing to focus on Diani, where he believes demand is more resilient. "Diani is almost purely a tourist destination, so it gives us a better opportunity than competing in saturated urban markets," he says.
Lennox Otieno, CEO of Subleasing Kenya.
Photo credit: Pool
However, setting up an short stay has also become more expensive than it was just a few years ago. Lennox says that he spent around Sh300,000 preparing his first apartment for guests, but subsequent investments have required far larger budgets.
“None of my properties has cost me less than Sh600,000 to set up,” he says.
He argues that simply furnishing an apartment is no longer enough. In today’s market, hosts are setting themselves apart by offering additional experiences for profit.
“For my business, that means offering premium beachfront properties in Diani alongside optional experiences such as curated local tours, while continuing to invest heavily in high-end furnishings and guest comfort,” says Lennox.
Five years ago, studios in Nairobi’s prime suburbs such as Westlands were rare because such units were often converted into servant quarters attached to larger homes.
However, as short stays, such as Airbnbs gained traction, developers spotted an opportunity in the form of studio, one-bedroom and two-bedroom apartments, which began to appear across neighbourhoods such as Kilimani, Kileleshwa and Westlands.
These apartments were built to target investors eager to tap into the lucrative short-term rental market. This rapid expansion has created a different problem: oversupply.
Nazarene Wangare, the CEO of Zarina Properties, who also works as a property manager, says that the market has become more competitive because these similar units are competing for the same guests.
“A person paying Sh4,500 is not the same as someone paying Sh1,500. That’s a different market. It changes your clientele,” she says.
For this reason, she deliberately avoids managing lower-priced listings.
"There are certain types of short stays you’ll never find me selling. I don’t touch anything below Sh4,000 because it comes with a lot of complications. The market becomes extremely wide.”
The impact of growing competition is perhaps most visible on the coast.
Wangare says that she left the short-term rental business in Mombasa when the operating costs became difficult to justify against the declining occupancy rates.
“It's difficult to achieve even a 15 percent occupancy rate, and if you reach 20 percent, you have to lower your rates just to break even.”
The same pressures are evident in Nairobi, where new apartment developments are also transforming the market. She points to Riara Road, where multiple projects are being developed within a small radius, each adding to the hundreds of existing apartments.
"If you have four projects within about 500 metres of each other, each with around 400 units, that’s an additional 1,600 units. Before that, there were very few units, so demand was very high."
The influx is also creating unrealistic expectations among some investors. Wangare cites the case of a client in the US who bought a one-bedroom apartment in Kileleshwa, expecting monthly returns of Sh120,000 to comfortably cover her mortgage repayments.
"That’s already above the market price," she says.
Instead of chasing ambitious rental targets, she believes investors should focus on occupancy and differentiation.
"If you’re setting up an short stay, you have to make it as stylish as possible to break even, because now you’re competing with more than 400 other owners," she says.
Although the business has grown to the point of oversaturation, some hosts are proving that it can still be profitable.
One of Wangare’s clients in Kilimani has expanded to four sublet units by negotiating lower rents with landlords, securing apartments with better views and investing heavily in professional interior design.
“She’s found a competitive edge, and her apartments are normally fully booked through the app,” says Wangare. Her advice to new investors is to stop relying on Airbnb’s early success stories.
“The only thing I usually advise investors on is achieving a high occupancy rate,” she says. "It’s better to take slightly lower rent if it means your unit is occupied. That’s what makes the numbers work today.”
According to data from the market analytics firm AirDNA, Nairobi had 12,870 active short-term rental listings in May 2026 — a 25 percent increase on the previous year. One-bedroom apartments dominate the market, accounting for 63.2 per cent of all listings, followed by two-bedroom units at 25.7 per cent. This reflects investors’ growing preference for smaller units that promise higher rental yields.
Nationally, market intelligence firm Airbtics estimates that Kenya’s short-term rental supply expanded by 40.75 per cent in 2025, with Nairobi adding around 1,840 new listings and Mombasa adding a further 443. This underscores the pace at which the market has grown.
The short stay boom has also altered the country’s residential property market, with investors betting that higher nightly rates would generate stronger returns than conventional leases. This trend has fuelled purchases in prime investment hotspots in Nairobi as well as in other tourism-driven destinations such as Naivasha and the coast.
Clive Ndege, head of sales at Superior Homes Kenya.
Photo credit: File | Nation Media Group
According to Clive Ndege, Head of Sales at Superior Homes Kenya, one-bedroom apartments have become the preferred investment choice as they strike a balance between affordability, financing accessibility and rental performance.
“One-bedroom apartments have consistently recorded the strongest demand,” he says, adding that two-bedroom units have also grown in popularity among investors seeking to attract families, professionals, and corporate tenants.
This, he observes, has translated into a growing demand for mortgage financing. Studio apartments in Nairobi's established investment corridors currently sell for between Sh4 million and Sh7 million, one-bedroom units for between Sh6 million and Sh10 million, and two-bedroom apartments for between Sh8 million and Sh15 million. Premium developments fetch considerably higher prices.
Despite the growing appetite for property investment, Kenya’s mortgage market remains relatively small. According to the Central Bank of Kenya (CBK), the country has just over 30,000 active mortgage accounts, suggesting significant room for expansion as more investors enter the housing market.
However, as short stay listings have multiplied, so has competition. Ndege says that the market has evolved from being driven by optimism to requiring careful financial planning.
"During its early stages, occupancy levels and nightly rates were exceptionally strong, encouraging many investors to enter the market with optimistic expectations regarding returns and mortgage servicing.
However, as supply has increased, the market has naturally become more competitive. Guests today enjoy a wider choice of accommodation, resulting in greater pressure on pricing, occupancy and service quality," he says.
Ndege also argues that investors are increasingly recognising that long-term value lies in quality developments, although this shift is also changing investor behaviour.
Rather than chasing short-term gains, more buyers are now evaluating properties for their ability to generate stable income over time.
"Long-term leases provide a steady monthly rental income, making it easier to consistently meet mortgage repayments and reducing the risk of cash flow shortfalls. In contrast, income from short-term rentals can fluctuate due to seasonality, tourism trends, business travel, competition and occupancy levels. Even a few weeks of low occupancy can significantly impact an investor’s ability to comfortably service a mortgage, especially if they have high levels of debt,” he says.
Beatrice Chege, Absa Bank Kenya’s Head of Mortgage, says the lender has also witnessed growing interest in investment properties over the past five years, particularly in two-bedroom apartments.
"The entry prices start from about Sh4 million for studio units, Sh5.5 million for one-bedroom apartments, and Sh10 million for two-bedroom units," she says.
Absa Bank Kenya Head of Mortgage Beatrice Chege.
Photo credit: File | Nation Media Group
Although Beatrice says the bank has not yet observed a notable rise in mortgage restructuring linked to short stay investments, she notes that lending decisions already factor in the risks associated with investment properties.
She says that mortgage underwriting takes such market dynamics into account while maintaining that real estate remains "an alternative investment class" capable of creating balanced investment portfolios.
However, for Ndege, the lesson from the changing short stay market is that investors should avoid chasing short-term trends.
"The fundamentals of sound property investment remain unchanged despite the evolving market conditions: just buy a good property in a good location. Whether you are investing for short stay or long-term rental income, factors such as accessibility, proximity to workplaces, schools, shopping centres and transport networks will continue to influence demand," he says.
