When Dr Dickson Despommier wrote his book The Vertical Farm a decade ago, the only examples he could point to were in science fiction.
The emeritus professor of microbiology and public health at Columbia University imagined a suitably sci-fi scenario – a self-sufficient skyscraper community with a farm built into it. He and his students pictured hanging gardens of leafy greens nestled between ponds of fish in the basement and chickens roosting in the rafters. It would be clean, secure, sustainable – and capable of feeding 50,000 people.
It was, he said, the future of farming.
Sadly, the skyscraper farm remains a fantasy. However, the vertical farm has not only become a reality but also a rapidly growing sector.
The question of why we need them is being eloquently, if alarmingly, answered every day. Extreme weather events are ruining harvests and becoming more common. Food miles have become a growing concern. Our most fertile soils are steadily degrading into dust.
And that’s before we worry about border issues and pandemics leaving produce to rot in warehouses.
The question now is not why or what, but how.
How can vertical farming – still a niche industry – move into the mainstream? How can it become cost-efficient enough to take a bigger bite out of the $3.6tn (£2.6tn) fruit and veg market?
Answer: With a little help from the property industry.
Size matters
JLL Future Studio has just finished writing a study on the subject. “We wanted to make the case for why vertical farming has a place in real estate,” says its head, Michael Davis.
Despommier has written the preface. “I never expected the concept to become viable so fast,” he writes. “In fact, I had no expectation of its commercial value at all, me being an academic. Lucky for me, lots of others caught wind of the idea, got funding from venture capital, and went off into the sunset of the world of leafy greens and bush berries.”
Some of these are vast enterprises. InFarm, a German operator and the largest in Europe, is a true unicorn. Blackstone recently started investing in vertical farming in the US. American firm Bowery raised $300m in May, while just last month rival Plenty raised $400m, despite only having two farms.
And more farms are being built every day. “Too many to count,” says Despommier. But he concedes that most of these are very small-scale. “They are allotments, really,” adds Davis.
Despite being worth $3bn, and despite the US titans and the eager investors, one of the biggest issues with vertical farming is the lack of scale.
“If you don’t have that, you are just selling niche products to wealthy consumers,” says Jamie Burrows, founder and chief executive of Vertical Future.
He should know, he’s been there. Burrows started Vertical Future with his wife, Marie-Alexandrine, in 2016. “It was a bootstrap company,” he recalls, set up in south London using a loan taken against their house.
Until you can go big, you are destined to make a loss.
Proving the concept
“At the moment, it costs us about £16 to produce a kilo of basil,” explains Harvest London founder Chris Davies. “We can sell it for £15.50. So right now, yeah, we are losing money.”
Davies stumbled into vertical farming – “I was a management consultant for my sins” – and after a “social crisis” went looking for something that sparked his imagination. “I started reading about vertical farming and I just couldn’t get it out of my head.”
A mutual friend introduced him to Matt Chlebek, a plant biologist, and that sowed the seeds for their new venture. In 2017, they opened their first farm in Walthamstow, E17 – “real proof-of-concept stuff, literally above an MOT garage and super self-funded, super small-scale”.
But they were proving the concept. They were turning away customers. With money from angel investors and crowdfunders, along with match funding from the government’s Future Fund, they raise £1m to scale-up. Davies signed the lease for the next farm, a 20,000 sq ft unit in south-east London in March 2020. “It was the biggest cheque I’d ever signed in my life.”
And then Covid struck.
To start with, Davies and Chlebek were terrified their business was going to wither on the vine. But the pandemic proved the virtue of what they were offering. Security, predictability. It now grows all the basil – 4.5 tonnes a year – for restaurant chain Pizza Pilgrims. Why get your basil from Italy, when you can get it from half a mile down the road for the same price, and save 250,000 food miles?
But even so, it doesn’t make any money. That would require an even bigger farm.
Harvest is now looking at a second round of fundraising. With its sights set on £20m or so, the start-up plans to build five more farms in five years. And they will not be small potatoes.
“The next one won’t be the biggest,” says Davies, “but it will be big.”
Growing money on trees…
Brooklyn-based Upward Farms says its new facility in Pennsylvania will be the world’s biggest, providing up to 250,000 sq ft of growing space. Dubai is also striving for the title, along with a clutch in East Asia and Europe. And so are a number in the UK.
The Jones Food Company says its site in Lydney, Gloucestershire, will be the world’s biggest, with 148,000 sq ft of growing space – three times the size of its current facility in Scunthorpe.
But it won’t hold the title for long. In May, Fischer Farms will open its £25m facility next to a traditional farm in Norfolk. It will have more than 270,000 sq ft of growing space, enough to supply 6.5 tonnes of fresh produce every day.
All this talk of whose building is biggest tickles JLL’s Davis. “It’s a bit of a penis-measuring exercise,” he laughs. But the industry is clearly a grower, with conservative estimates saying it will be worth $12bn by 2026 and more than $24bn by 2030. “And we are going to see an explosion in the larger growing facilities.”
But the next generation could make even these whales look like minnows. Vertical Future – Burrows’ “bootstrap” business – left growing the actual veggies in 2019, when it raised £4.2m and pivoted to focus on the tech.
It now has six farms, 20 projects in the pipeline and plans to set up a regional office in Singapore. In January, Burrows completed Europe’s largest-ever series A fundraise in the vertical farm sector, raising just over £21m and giving his company a value of £100m and change.
It is now in talks with a supermarket group for a five-year project. Burrows would not confirm rumours of a 1m sq ft-plus farm, but did concede that its next project “would dwarf anything that’s been seen in the market” so far.
And soon the company plans to scale up even further, with talk of a chair coming in from a FTSE 100 company and even, say some analysts, the possibility of a £500m valuation in the next two years.
In other words, the UK could soon match the US for scale.
… or priced out of the market
But there are concerns surrounding the sheer level of investment going into the US farms. Many of the first wave have collapsed. In this second wave, many others are running out of money. One of the few that has actually floated, AppHarvest has seen its share price plunge by double digits since its IPO last year.
Last October, AeroFarms pulled back from a planned $1.2bn SPAC deal after investors appeared to get cold feet. Others are valued by their investors at 100 times more than their turnover, despite not making a profit.
Investor appetite in the UK is on nothing like this scale, but it is slowly catching up. “Venture capital firms are receiving five pitch decks a week from growers,” says Burrows.
All impressive stuff. But it is worth remembering that only around 30ha of vertical farmland have been created worldwide. Even if that quadrupled in the next year, it would be a mere fraction of the 50m ha devoted to conventional farming, or even the 500,000 ha covered by greenhouses.
One of the things holding back the industry is the sheer cost. It has been estimated that a vertical farm costs 850 times more per square metre to set up than a traditional farm. Added to that is the cost of lighting, temperature controls, robotics and automation… But the biggest expense is the cost of the building itself.
Larger-scale vertical farms are a perfect fit for warehousing, especially units near to food logistic hubs and highly connected road networks. Ocado, which has invested £6m in JFC, has said it wants vertical farms next to its distribution centres to guarantee a supply of fresh produce and reduce food miles.
But as the demand for industrial space is at an all-time high, they risk being priced out before they can get going.
Harvest’s Davies is not concerned. “The space we want isn’t the sort of space that everyone else wants,” he says. His next site is in lawyers’ hands so he is being cautious. But his excitement is palpable.
Finding the perfect neighbour
As well as scale, he says, the key to site selection is co-location.
Many buyers of herbs and leafy greens have already latched on to this principle – with Ocado wanting vertical farms next to its delivery hubs, Germany’s Greenman setting them up next to its supermarkets and even beauty firms such as L’Oreal wanting them near its factories to provide the linalool needed for face creams.
But this principle can go further. Harvest London wants to co-locate next to a power station. Not only will it get a dedicated powerline for all of its LEDs and robotics – at a 40% discount, thank you very much – it will also have access to all the waste CO2 its hungry plants can eat. “Normally, we would have to import that,” says Davies. “For a power station, that’s a waste product.” Meanwhile, the plant waste can be used as fuel for the power plant.
And all this can be done inside the shell of an existing warehouse, with enough space to grow 250 tonnes of fresh food a year.
But JLL’s Davis argues that many more could be stitched into mixed-use developments and used to repurpose stranded assets.
And almost anything can be converted into a vertical farm, with a little ingenuity. “This is one of the few solutions that’s bloody easy to crowbar into a lot of buildings,” he says. “You could do it in an elevator shaft.”
In the UK alone, farms have so far been set up in abandoned air-raid shelters, shipping containers and office buildings. In the US, market leader AeroFarms started off in a former steel mill, before expanding into the disused paintball and laser tag venue next door.
In fact, the very trends disrupting the office and retail markets could be exactly what these urban farms need. As more people work from home and occupiers opt for greener, grade-A stock, many of those stranded assets could be repurposed as vertical farms. “Tertiary offices in inner cities are perfect for vertical farming fit-outs,” Davis says.
Even the owners of some defunct department stores have explored the possibility of converting them to agriculture. “We were talking to the owner of a former Debenhams,” says Harvest’s Davies. “And they’re, like ‘Could you convert that into a vertical farm?’ And the answer is, of course, yes.”
But there are caveats. Cost is one, as spending £15m to turn a Debenhams into an initially loss-making veg box might not be the best investment. But even if the economics stack up, the traffic from delivery vehicles will be far higher than it was for a department store.
Modern methods of transportation could solve that, though. And a future shift away from car use could also free up car parks, JLL’s report suggests. Indeed, it features a case study in New Jersey, where RAND Engineering and Architecture is working with Ikea on a plan to turn its car parks into farms. You can pick up your flatpack and your flat-leaf parsley at the same time.
“Retail warehouses, former monolithic power stations or railway terminuses. All the kit you see sitting around the edge of city centres and towns,” Davis expounds. “It could all be used.”
A couple of years ago an enterprising architect even put forward plans to turn Smithfield meat market into a vertical farm, although that may have been more of an exercise in irony than anything else.
Wherever they end up being, supermarkets and the hospitality industry, hungry for a secure supply of ultra-fresh food, will be the ones to drive this next stage of growth.
Burrows says that in five years’ time “three or four mega companies” with multiple farms will be supplying the UK’s major retailers. Alongside them, he predicts, will be a few hundred smaller, locally based companies.
It’s a big occupier market, potentially millions of sq ft, but one which few in the property industry seem to be actively pursuing. Most of the assets that have been converted are owned by individuals or smaller landlords. Some small developers, such as Trafalgar Homes, have shown an interest. “But from the big ones?” Davis asks. “Nothing.”
But he believes that could soon change. “How long before a big property company part invests in a vertical farming business and sticks them into their estates?” he muses. “I think there’s a massive opco propco angle here.”
© Main photo: Shutterstock
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