Imagine going to a grocery store and buying a head of lettuce in the produce aisle. When you buy it — especially if it’s in a wooden-clad grocery store like Whole Foods — you imagine that it was produced at a local farm in your city or state. Now, with the rise of vertical farms, that lettuce head is also being grown in farming warehouses, one key part of industrial real estate that is on the rise.
According to the United Nations, by 2050 the world will need to produce 60% more food to feed a growing population of 9.3 billion. Traditional farming isn’t enough. It’ll take a heavy toll on our natural resources. Vertical farming is part of a greener revolution where farmers can increase crop production sustainability, while coping with weather extremes.
In fact, the vertical farming industry is expected to be worth $33 billion by 2030, according to Grand View Research. Globally, the vertical farming produce market is expected to reach $6.46 billion by 2027, growing 25.7% from 2020 to 2027.
Some say this is the future of food, like Italy’s ZERO Farms. The company’s CEO, Daniele Modesto, noted that the world population is booming, and arable land is being destroyed at a rapid rate.
“People need good, safe food and can’t afford to keep on throwing away precious fresh water,” Modesto said in a statement. He described vertical framing as a “viable answer” to this problem.
Between 2005 to 2014, the demand for locally-made food increased by seven times, according to vertical farm specialists Indoor Ag-Con. Today, it’s a roughly $10 billion industry, and with organic food sales at an all-time high. Consumers want food with lower pesticides and are willing to spend more for locally-sourced produce.
For one, ZERO Farms is more than just a growing farm. They’re a research and development firm, a tech company and industry partner who help understand crops and aim to redefine agriculture in 2022.
“Vertical farming is accessible, reliable, ultimately scalable, and we’re Italians, so we know what to do when it comes to perfect agriculture,” he said.
Image provided by Farm.One
Each vertical farm has its own method. Data is processed in real-time by their artificial intelligence system, ROOT for what they call a “crop hacking process.”
According to ROOT’s website, indoor farming is more sustainable than outdoor farming. Inside a modern greenhouse, digitally controlled light nutrients, and atmosphere mean over 20x the amount of crop per acre can be produced with 90% less water than traditional methods.
The vertical farm warehouse is becoming a mainstay for grocery companies across the U.S., too. Walmart just invested in the vertical farming startup, Plenty, showing that it’s a worthy investment. It’s part of Walmart’s $400M Series E funding round. Walmart is the first large U.S. retailer to significantly invest in vertical farming.
In a statement, Walmart U.S. Chief Merchandising Officer Charles Redfield said, “We believe Plenty is a proven leader in a new era of agriculture, one that offers pesticide-free, peak-flavor produce to shoppers every day of the year. This partnership not only accelerates agricultural innovation, but reinforces our commitment to sustainability, by delivering a new category of fresh food that is good for people and the planet. By building their farms closer to the consumer, Plenty helps reduce transportation and food waste, keeping items fresher for longer in 100% recyclable product packaging.”
Plenty’s unique farming system unlocks industry-leading crop versatility and unit economics, growing indoor goods year-round. Meaning their farms can bring fresh fruits and vegetables to grocery shelves at a record speed — and at maximum freshness.
“The next wave of fresh produce offered by vertical farms will be distributed by grocers who realize that pesticide-free products with a better shelf life are also good for their business,” said Plenty CEO Arama Kukutai. “This is a game-changer for the agritech industry.”
Some of the most established farms in the market include AeroFarms, which was founded by David Rosenberg in 2004 in Abu Dhabi, and plans a third location this year. There’s also FarmPod, based in St. Croix, which has created a system for customers to grow 100 pounds of produce every week in two parking lot-sized spaces. There’s also Pittsburgh-based Fifth Season, which relies on advanced robotics and AI to automate the harvesting and growing process. Upward Farms, a Brooklyn-based startup, recently announced their plans to build a new 250,000-square-foot farm in eastern Pennsylvania.
Current deals include one with Infarm in Berlin for $200,000, and another with Seoul’s Green Labs raising $140,000. New York’s Upward Farms is as follows, raising $121,000.
But it isn’t always peachy when it comes to capital funding. One vertical farm in Brooklyn called Farm.One has temporarily shut down their operations while they work on raising the $5 million necessary to continue operating and growing, the company. As they wrote on their crowdfunding page, they’re one of New York City’s urban vertical farms using LED lighting. In only a year, they’ve worked with some of the world’s top chefs. They have worked on growing local, rare produce (like one rare herb called ‘papalo’), all pesticide-free.
According to Farm.One CEO Robert Laing, who founded the company in 2016, the recent spike in interest in vertical farms among investors have led venture capitalist firms to be reticent to invest in yet another one. That obstacle doesn’t stop them, however.
“At Farm.One, we’re rethinking our broken urban food system, by building farms right where people live,” he said. “This allows us to deliver directly to consumers within just hours of harvest, and avoid the traditional grocery store supply chain, which creates waste. We plan to build dozens of neighborhood farms over the next five years.”
Like Farm.One, many other vertical farms need climate-controlled warehouses to stay in operation, so it’s becoming a key part of industrial real estate, as the industry continues to grow.
To get these spaces, they need the funding. Bowery Farming gained $150 million in support from investment firm KKR. Now they’re focusing on building two new farms in Atlanta and Dallas, opening early 2023, creating over 200 green jobs.
Next up, Singapore is working toward opening its first vertical mega farm, Kalera, which is a leader in sustainable vertical farming. “The new indoor farm will change consumption of locally-grown and harvested greens in Singapore as we know it,” said Henner Schwarz, Chief Commercial Officer at Kalera. “We’ll be producing 500,000 kilograms of greens each year, which can be harvested right before consumption, resulting in higher nutritional value, less food waste and reduced CO2 emissions.”
With their first harvest planned by fall of this year, this new farm offers support to Singapore’s long-term food security plan. The farm is funded by Singapore Food Agency’s 30 x 30 Express Grant, which supports the local agriculture industry to produce 30% of the country’s nutritional needs locally and sustainably by 2030.
“By changing the way food is grown and eaten, our Singapore farm, paired with our R&D center, will continue to drive the global urban farming revolution,” said Kerstin Köhler, Country Manager, Singapore at Kalera.
With the rise of this global trend comes new opportunities to invest in the needed warehouses. Like the farms themselves, the financial trend is vertical.