Vertical Farm Basics and Overview
What Is a Vertical Farm? Structure, Types, and Characteristics from a Grower-First Perspective
A vertical farm is not a technology for industrializing agriculture. More precisely, it is a production system in which people design the environment where crops grow, reducing the fluctuations caused by weather and seasons.
Being able to control temperature, humidity, light, CO2, and nutrient solution is a major strength. At the same time, vertical farms carry the burden of capital investment, electricity, and labor costs, so viewing them simply as “the agriculture of the future” leads to a misreading of the reality.
In this article, I lay out the definition of a vertical farm, the differences from open-field farming and protected cultivation, the main cultivation methods, and the business-side benefits and challenges.
The risks and safety of vertical farms are covered in detail in the article below.
Examining the Risks of Vertical Farms One by One, and Diagnosing Their Safety
The Basics of Vertical Farms: Facilities That Grow Vegetables Through Environmental Control
A vertical farm, as the name suggests, is a facility that grows plants in an industrial-style setting. Unlike an ordinary factory, what is produced is not an industrial product but vegetables.
Defining the Vertical Farm — A “Factory” That Grows Vegetables
Specifically, temperature, humidity, light, CO2 concentration, and nutrient solution (water with dissolved fertilizer) are controlled according to the crop type and the growth stage.
The goal is to create the growing conditions that stabilize quality and yield. Maintaining uniform quality while maximizing production, and minimizing weather-driven uncertainty — that is the fundamental value of a vertical farm. Combined with automation, it can also significantly reduce the labor required for day-to-day crop management.
So, what are the differences among open-field farming, greenhouses, and vertical farms? The biggest one is the “degree of environmental control.”
Open-field farming is heavily influenced by the natural environment, including rain, wind, and sunlight. Greenhouses allow some environmental control, but not to the extent of a vertical farm. A vertical farm’s defining feature and strength is that it can produce vegetables reliably and on schedule, independent of the weather.
The History of Vertical Farms
The prototype of the vertical farm goes back to the United States in the 1950s. Research aimed at food production in outer space led to early efforts to grow plants in closed environments.
In the 1970s, research also gained momentum in Japan. Concerns about food crises were rising, and demand grew for a stable food supply system. That said, early vertical farms were too costly to be commercially viable.
Vertical farms began to develop significantly from the 2010s onward. The spread of LEDs dramatically reduced power consumption, and more cases started to balance the books. Technical development for labor savings and productivity improvement continues today, and after more than half a century of research and development, the sector is finally entering a phase of broader adoption.
The Background Behind Why Vertical Farms Will Become Essential
Behind the need to grow vegetables indoors lie two social issues: “stable food supply” and “climate change.”
Take stable food supply first. The world’s population continues to grow and will approach 10 billion by 2050. As the population grows, food demand expands, but farmland is limited — and it continues to shrink due to desertification and urbanization. In Japan, the aging of farmers and the lack of next-generation successors are serious problems, and securing the people who will carry agriculture forward has become a challenge.
The situation with climate change is also becoming harsher. In recent years, extreme weather has occurred frequently and has dealt serious blows to agricultural production. With record heat, prolonged drought, torrential rainfall, and recurring powerful typhoons, there are limits to a stable supply that relies on open-field farming.
Vertical farms are expected to be a means of solving this instability in food supply and the production risk caused by climate change.
The Three Forms of Agriculture: Comparing Open-Field Farming, Protected Cultivation, and Vertical Farms
A vertical farm is just one form of agriculture. By sorting out its differences from other forms, the characteristics of a vertical farm become clearer.
The Three Forms of Agriculture and the Cultivation Methods That Fit Them
Agriculture can be broadly divided into three types: open-field farming, protected cultivation, and vertical farms. The table below summarizes which cultivation methods suit each.
| open-field farming | protected cultivation | vertical farm | |
|---|---|---|---|
| Soil cultivation | ◎ | 〇 | △ |
| Hydroponics | × | △ | ◎ |
| Substrate cultivation | △ | 〇 | 〇 |
| Aeroponics | × | × | ◎ |
- ◎: Optimal
- 〇: Suitable
- △: Possible under certain conditions (limited)
- ×: Not suitable
Facility Categories
- open-field farming
- Cultivation in outdoor fields with no roof or walls. It uses the natural environment, such as sunlight and rainwater, and requires a large area of land.
- protected cultivation
- Uses facilities with roofs and walls, such as greenhouses. It reduces the influence of outside air and allows some control of temperature and humidity. Stable production is possible compared with open-field farming. Construction and maintenance costs are required.
- vertical farm
- A closed space where the growing environment can be artificially controlled. Light, temperature, humidity, CO2, and nutrient solution are optimized, enabling year-round, planned cultivation that is unaffected by weather. Advanced equipment, expertise, and high operating costs are required.
Cultivation Methods
- Soil cultivation
- Plants are grown in soil. Basic crop management such as fertilization and watering is required. Widely used in open-field farming and protected cultivation.
- Hydroponics
- Plants are grown without soil, using only nutrient solution. It is clean, has few pests and diseases, and crops grow fast. Advanced nutrient solution management is required, and it is mainly used in vertical farms.
- Substrate cultivation
- Uses solid media such as coconut husk or rockwool. It leverages the characteristics of both nutrient solution and solid media. Management is easier than hydroponics, and it is used in protected cultivation and vertical farms.
- Aeroponics
- Plants are grown by spraying nutrient solution as a mist onto the roots. Because roots are exposed to the air, oxygen uptake at the roots is efficient. Advanced environmental control is required, and it can only be used in limited settings such as vertical farms.
Some readers may wonder, “Are vegetables grown in a vertical farm safe?” Given the connotation of the word “factory,” that reaction is natural, but once you understand how they work, most of the safety concerns are resolved. See the article below for details.
How Do Vegetables Change When Grown with Hydroponics? The Risks Explained Clearly
Comparing the Differences Between Facility Categories
The differences among open-field farming, protected cultivation, and vertical farms show up in the degree of environmental control, productivity, costs, and more.
| open-field farming | protected cultivation | vertical farm | |
|---|---|---|---|
| Environmental control | Low | Medium | High |
| Productivity | Low | Medium | High |
| Quality | Variable | Relatively stable | Uniform |
| Cost | Low | Medium | High |
| Environmental load | High | Medium | Low |
| Stable supply | Unstable | Relatively stable | Stable |
| Climate change resilience | Low | Moderate | High |
| Crop range | Seasonal crops | A wider range than open-field farming | Leafy greens, some fruiting vegetables, etc. |
Key Points for Each Item
- Environmental control:
- A vertical farm controls temperature, humidity, light, CO2, and so on at a high level, creating the optimal environment for crop growth. Protected cultivation allows some environmental control, while open-field farming depends on the natural environment.
- Productivity:
- A vertical farm has the highest yield per unit area. Protected cultivation is more productive than open-field farming but does not match a vertical farm.
- Quality:
- A vertical farm produces uniform quality, and it is also possible to fine-tune nutritional content and functional components. Open-field farming is affected by the natural environment, so quality tends to vary.
- Cost:
- Open-field farming has low initial investment, while a vertical farm requires heavy spending on facility construction, equipment, and operating costs. Protected cultivation sits between open-field farming and vertical farms on cost.
- Environmental load:
- A vertical farm can dramatically reduce water use and pesticide use per unit area. However, energy consumption is high. Open-field farming requires large areas of land and has a high environmental load from pesticides and fertilizers.
- Stable supply:
- A vertical farm enables year-round cultivation unaffected by weather and can supply produce consistently. Protected cultivation is also relatively stable, while open-field farming is heavily influenced by weather and seasons.
- Climate change resilience:
- A vertical farm is less affected by abnormal weather and is strong against climate change. Protected cultivation is more resilient than open-field farming but not to the extent of a vertical farm.
- Crop range:
- Open-field farming centers on seasonal vegetables. Protected cultivation enables a wider range of crops. Vertical farms center on leafy greens but are well suited to functional vegetables.
How a Vertical Farm Works
The typical image of a vertical farm is a multi-tier setup with vegetables packed tightly on stacked shelves. In such setups, hydroponics is widely adopted. That said, several cultivation methods exist beyond hydroponics.
Comparing Cultivation Methods (Vertical Farm)
Because closed-type vertical farms (PFALs) are closed environments, they pair extremely well with hydroponics, which has therefore been widely adopted. There are also other cultivation methods, such as substrate cultivation and aeroponics, that make use of the characteristics of a vertical farm.
| Item | hydroponics | Substrate cultivation | Aeroponics |
|---|---|---|---|
| Cultivation method | Grown in nutrient solution only, no soil needed | Uses solid media (coconut husk, rockwool, etc.), with drip irrigation | Roots exposed to the air, nutrient solution sprayed as mist |
| Features | Clean, few pests and diseases, fast growth, easy to automate | Easier to manage than hydroponics, flavor closer to soil-grown produce, simpler drainage management | Abundant oxygen supply, promotes root growth, space-efficient |
| Advantages | Clean, few pests and diseases, fast growth, easy to automate | Easier to manage than hydroponics, flavor closer to soil-grown produce, simpler drainage management | Abundant oxygen supply, promotes root growth, space-efficient |
| Disadvantages | Nutrient solution management is critical, high equipment cost | Media disposal is needed, slightly high initial cost | Advanced environmental control required, high equipment cost, high technical difficulty |
| Examples | Leafy greens (lettuce, salad greens), herbs, green onions | Fruiting vegetables (tomatoes, strawberries), floricultural crops | Leafy greens, seedling production, research use |
Comparing Facilities (Vertical Farm)
Beyond cultivation methods, facilities can also be classified by whether they use sunlight or artificial light. This difference directly affects electricity costs, equipment costs, and labor costs, and it has a major impact on business profitability.
Including open-field farming, we compare four categories: greenhouse, hybrid (sunlight plus supplemental artificial light), full PFAL (Plant Factory with Artificial Lighting), and open-field farming.
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| Greenhouse | Hybrid type | Full PFAL | open-field farming | |
|---|---|---|---|---|
| Share of cultivation form | 44% | 14% | 42% | – |
| Main light source | Sunlight | Sunlight, LED 81%, HPS (high-pressure sodium) and fluorescent lamps etc. 38% | LED 96%, fluorescent 8%. LEDs mainly introduced from 2013 onward | Sunlight |
| Water source | Well water 62%, tap water 38% | Well water 60%, tap water 33% | Tap water 78%, well water 20% | Rainwater, well water, tap water, etc. |
| CO2 application | Applied at 83% | Applied at 86% | Applied at 89% | Natural atmospheric CO2 concentration |
| Main crops | Tomatoes 71%, strawberries 8%, fruiting vegetables other than strawberries 8%, leafy greens other than lettuce 6% | Tomatoes 27%, lettuce 27%, floricultural crops 20% | Lettuce 91% | Wide range |
| Employees (year-round, regular) | Under 110 people: 34%. Average 9.8 per facility | Average 9.2 per facility | Average 8.0 per facility | Depends on operation size |
| Employees (year-round, non-regular / part-time) | 20–50 people: 35%, 50+ people: 24%. Average 44.0 per facility | 20–50 people: 31%, 50+ people: 31%. Average 46.3 per facility | 20–50 people: 19%, 50+ people: 21%. Average 28.3 per facility | Depends on operation size |
| Employees (fixed-term) | Excluding no-employment cases, 1–5 people: 26%. Average 9.6 per facility | Average 16.4 per facility | – | Depends on operation size |
| Share of tasks for main crops | Production (especially crop management) 35%+ is the largest share | Production (especially crop management) 35%+ is the largest share | Harvest 27%, shipment 24%, transplanting and final planting 19%, washing 10%, in that order | Depends on crop and cultivation scale |
| Profit/loss by yield per labor hour | Higher yield per labor hour correlates with a lower share of loss-making operations | – | Higher yield per labor hour correlates with a lower share of loss-making operations | – |
| Cost ratio by yield per labor hour | Higher yield means a smaller labor cost ratio | – | Higher yield means a smaller labor cost ratio | – |
| Profit/loss by per-area yield | Higher per-area yield correlates with a higher share of profitable or break-even operations | – | Higher per-area yield correlates with a higher share of profitable or break-even operations | – |
| Most recent financial results | Profitable or break-even: 73% | Profitable or break-even: 60% | Profitable or break-even: 45% | – |
| Annual revenue | Average 430 million JPY | Average 460 million JPY | Average 190 million JPY | Depends on operation size |
| Profit/loss by actual cultivation area (main crops) | Larger area, higher share of profitable/break-even operations | – | Larger area, higher share of profitable/break-even operations | – |
| Cost ratio by cultivation form | Labor cost in the 30% range is the largest | Labor cost in the 30% range is the largest | Labor cost in the 30% range is the largest, electricity 27% | Depends on crop and cultivation scale |
| Cost ratio by profit/loss | For profitable operations, utility and depreciation ratios are smaller | – | For profitable operations, utility and depreciation ratios are smaller | – |
Note: This vertical farm data is based on the results of the “Survey and Case Study on Large-Scale Protected Cultivation and Vertical Farms” conducted by the Japan Greenhouse Horticulture Association.
Note: For open-field farming, conditions vary greatly by weather, location, operation size, and crops, so a simple numeric comparison is not appropriate.
Looking at Vertical Farms from a Business Perspective
Vertical farms draw attention as a business opportunity thanks to benefits such as stable supply, high quality, and reduced environmental load. At the same time, there are many challenges, and entering the market does not guarantee success. If you are considering entering the vertical farm business, you need an accurate understanding of the drawbacks as well.
The Benefits and Drawbacks of Vertical Farms. Everything I Learned on the Ground
The Challenges Vertical Farms Face
Vertical farms still face many challenges. The repeated cases of large companies entering the sector only to withdraw have the following issues as their backdrop.
The Real Reason Large Companies Start Vertical Farms and Withdraw Right Away
- High initial costs and running costs:
- Building a vertical farm requires large initial costs for facilities and equipment. Running costs such as electricity and HVAC also tend to be higher than conventional agriculture. In particular, in a full PFAL, LED lighting and HVAC consume a lot of power, making cost reduction a major issue.
- Sophistication of cultivation techniques and a shortage of talent:
- In a vertical farm, you need to apply expertise in plant physiology and environmental engineering to produce vegetables efficiently. However, people with this knowledge and experience are in short supply, and developing talent has become an urgent task.
- Limited crops and varieties:
- In today’s vertical farms, the range of crops that can be grown is limited. Leafy greens such as lettuce are the center, and many crops — including grains like rice and wheat, fruit trees, and root vegetables — are difficult to grow.
Against these challenges of high cost, talent shortage, and limited crops, research and development continues around the world. Development of vertical farms that use sunlight and the adoption of AI-based environmental control systems are among the ongoing technical innovations aimed at energy savings and efficiency.
That said, it cannot yet be said that new technologies such as AI and automation are working sufficiently on the ground. Many parts still rely on human hands, and the vertical farm industry is still maturing.
How to Think About Making a Vertical Farm Business Succeed
To succeed in the vertical farm business, it is not enough to invest in technology and equipment — how you face the market is critical.
The first thing you need is to be clear about who you are delivering what kind of vegetables to. Are you supplying high-value herbs and baby-leaf greens to nearby restaurants? Making shipments of consistent-quality leafy greens to supermarkets? Or delivering functional vegetables to health-conscious consumers? Change the target, and the crops you should grow and the cultivation design change completely. Companies entering from other industries tend to fall into the mindset of “sell what we have made,” but without the perspective of “make what will sell,” surviving in the market is difficult.
Differentiating from competitors is also essential. New entrants into the vertical farm business are increasing, and getting caught in homogeneous competition leaves you exposed to price pressure. Quality, varieties, services, brand story — you need to define early where you will set yourself apart.
Furthermore, vertical farms have a structure in which it is hard to become profitable without a certain scale. Since it is also a field where technical innovation is fast, you need to keep taking in the latest technology and market information while pursuing both productivity improvement and cost reduction at the same time.
The Breakthrough for Cracking the High Costs of Vertical Farms Is “Scaling Up”