Sitting on some unused real estate in your warehouse? Thinking of entering the indoor farming game by purchasing an otherwise underutilized space that you can turn into revenue?

With indoor vertical farming (and indoor farming more generally), that open floor and wall space can easily be transformed into a profitable, sustainable venture that has positive benefits for both you and the community at large. As agriculture shifts indoors due to technological advances and climate considerations, indoor vertical farming has emerged as a future-proof investment. This blog uses our own internal knowledge at Just Vertical to deep dive into the economics of indoor farming and explains how you can turn unused or dead space into a revenue-generating asset.

We're going to use our expertise to explain (from our experience) the upfront costs, ongoing expenses, types of crops you can grow, potential sales channels, and why vertical indoor farming is a smart long-term investment.

The Economics of Indoor Vertical Farming: Upfront Costs

Understanding Upfront Costs for a Farm

As the saying goes: "you need money to make money". As such, the first thing any budding indoor farmer needs to consider is the initial capital outlay. Thankfully, in the case of indoor farming and vertical farming, that initial outlay can be actually fairly insignificant if space is either a) limited, or b) you want to test something small before leaning in with your hard-earned cash.

So let's mention the first thing first - building an indoor vertical farm isn't just about setting up grow racks and lighting; it's about comprehensive planning and installation to maximize yield and efficiency.

The upfront cost typically includes:

1. Consultation and Design Services -- This initial phase involves working with expert consultants to map out your space, visualize the growth potential, and customize it for optimal production. This cost encompasses everything from initial consultations to design planning, ensuring that your farm layout optimizes space utilization, airflow, lighting conditions, and movement of people (after all, you'll need to get around your farm efficiently). When considering design, it's essential to factor in the environmental controls needed to maintain optimal growing conditions, in particular HVAC systems (which are essential in controlled agricultural environments). Some vendors will include this in their cost, others will add this as an extra cost.
2. Installation and Setup -- Installation covers building out the physical infrastructure, integrating irrigation systems, setting up automated controls, and ensuring proper electrical setups. Installing a hydroponic or aeroponic system (check out this article here if you're unsure of the difference) in a specific environment requires specialized knowledge. There are many things to consider including balancing maximizing plant sites, maintaining accessibility for maintenance, ensuring the technology works, developing your space for yield, and considering practical harvesting options. Additionally, investing in high-efficiency LED grow lights is crucial. High-quality lights reduce energy consumption while ensuring plants receive the spectrum they need for robust growth. A word of advice - this is probably the most important consideration for your indoor farm. We work with esteemed LED light supplier Photontek, but it's very easy to fall into a trap of skimping out on lighting and jeopardizing your entire grow operation.

With everything above taken into account, we estimate that a reasonably priced farm (with external consultation) is around $1,000 per square foot. This number can vary depending on the supplier, their approach, and their payment structures.

Beyond the physical setup, you also need to consider the automation of monitoring systems. Sensors that track pH levels, nutrient concentrations, and climate data are very important for managing large indoor farms at scale, but not essential (depending on your size). Automation reduces labor costs, minimizes errors, and ensures consistent crop health.

When all these factors are combined, the initial investment may seem substantial, but the returns, when managed correctly, can quickly justify the cost (want to know how quickly - read on, my friend).

One major thing to note on this section - there are grants and funding sources available that can significantly reduce your initial capital outlay. We've gone to the effort to compile many of the sources on our funding and grants page so you don't have to do the legwork of finding funding sources.

Ongoing Costs of Operating a Farm

Recurring Expenses in Indoor Vertical Farming

Thought the expenses were done? Think again. Running a farm requires ongoing investment, which is essential to maintaining healthy plants and maximizing your return. Trust us, all this initial cost chat is well worth it when you see the return.

The main recurring expenses include:

1. Nutrients and Fertilizers -- Plants require a consistent supply of nutrients, and this cost can vary depending on the crops being grown. Hydroponic and aeroponic systems require precise nutrient mixtures that are readily available in the market. At Just Vertical, we've had enormous success with Dutch hydroponic specialists Canna for nutrients. Nutrient costs, while ongoing, can be optimized by automating dosing systems that ensure plants receive only what they need without waste. For instance, a leafy green-focused farm might spend approximately $10 per square foot annually on nutrients, given their faster growth cycle and higher turnover rates.
2. Seeds and Supplies -- The type of crop you choose will impact your seed and supply expenses. Leafy greens and herbs, which grow quickly and can be harvested multiple times, provide a higher return but require regular re-seeding. On the other hand, longer-term crops like tomatoes or peppers might require more significant upfront costs but less frequent replanting. Our ROI calculator (found here and below) uses more turns (the amount of times you'll turn over your crops in your farm) for leafy greens and herbs, and less for tomatoes and peppers (our main fruiting plants we use in our analysis).
3. General Maintenance and Labor -- Regular upkeep is key. This includes managing plant health, cleaning, and ensuring your systems run efficiently. A well-maintained farm requires monitoring to prevent issues like nutrient imbalances, pests, or diseases. While automation can handle much of the work, it's still vital to have trained staff to monitor the farm and handle tasks like crop rotation, system cleaning, and packaging.

For smaller operations, labor can be a significant portion of the costs. However, as you scale up, economies of scale reduce these costs per square foot. Automation can also reduce this cost. Many of our clients have built partnerships with local educational institutions or organizations to access skilled labor or reduce operational expenses by integrating shared resources.

Additionally, keep in mind that utilities like water and electricity are ongoing expenses. However, innovative practices like recirculating irrigation systems and energy-efficient lighting can minimize these costs, maximizing profit margins.

What You Can Grow: Best Crops for Indoor Farming

Choosing the Right Crops for Maximum Profit

Selecting the right crops is critical to the success of your farm. Here's an overview of the most profitable crops and their associated revenue. For these calculations, we've used a Just Vertical custom farm (you can learn more about our custom farms).

1. Leafy Greens -- Yielding up to $12.50 per plant site annually, leafy greens like lettuce, kale, and spinach provide a quick return on investment with a payback period of 11 months. These crops are particularly popular due to their short growth cycle (30-45 days), allowing for multiple harvests per year. We've noticed that leafy greens (and small, crisp lettuce varieties in particular) are very popular in the market considering their difficulty and inconsistency when grown outdoors.
2. Herbs -- High-value herbs like basil, mint, and cilantro can generate $10.50 per plant site annually, also offering a payback period of 11 months. Herbs are favored by chefs and gourmet food suppliers, as fresh herbs are often more flavorful than dried alternatives. Additionally, herbs like basil have the advantage of being able to be sold both fresh and dried, providing multiple revenue streams.
3. Tomatoes and Peppers -- These fruiting crops provide approximately $8 per plant site annually, with a payback period of just under 2 years. Though they require more attention and longer growth cycles, tomatoes and peppers have high market value and can be sold fresh or processed. These crops are ideal for farms that can manage the extended growth periods while still maintaining consistent output. It's worth mentioning that, although the number of turns (harvests) are reduced with tomatoes and peppers, the plants themselves don't require replanting regularly as they continue to bear fruit.

As previously mentioned, the above calculations are using a custom Just Vertical farm (for which the initial capital outlay and costs are also calculated). Payback periods will depend on the farm setup you ultimately decide to implement, the initial capital outlay, and the ongoing costs.

Where to Sell Your Produce: Market Opportunities

Finding Buyers for Your Indoor-Grown Produce

You have several avenues to market and sell your produce:

1. Grocery Stores -- Local supermarkets and organic food stores are prime markets for fresh, locally grown products. A quick search in our hometown of Toronto shows a huge variety of local suppliers in the city like the Sweet Potato and Unboxed Market. Farms located near urban centers can capitalize on the demand for fresh, hyper-local produce, reducing transportation costs and delivering fresher goods than traditional supply chains. Establishing partnerships with local grocery stores equals consistent orders and a reliable income stream.
2. Restaurants and Cafés -- Chefs are increasingly looking for fresh, hyper-local ingredients, especially those focused on farm-to-table dining. With trends like farm-to-fork and sustainability in the culinary world, many restaurants are eager to source from nearby farms. Warehouse farming can fulfill this need, providing consistent, year-round supply regardless of seasonal fluctuations. This is particularly relevant in climates where growing year-round is impossible (like almost all of Canada and much of the northern United States).
3. Direct-to-Consumer Sales -- Selling directly to customers via farmers' markets or online platforms can be a lucrative option. The rise of e-commerce and direct-to-consumer marketing has opened up new avenues for small-scale farmers. Subscription models or community-supported agriculture (CSA) boxes are also ways to engage local customers and establish recurring revenue. Farmers markets are also a great opportunity to build a brand following around your product, your farming operation, and your produce.
4. Value-Added Products -- Consider transforming your produce into products like pestos, sauces, or herb-infused oils. By vertically integrating your business, you can command higher prices for your crops and appeal to a broader market.

Developing a strong brand and leveraging digital marketing strategies can help expand your reach. Tapping into social media platforms, local food movements, and online marketplaces can amplify your sales efforts, building a loyal customer base over time.

ROI Calculator: Estimating Your Farm's Potential

Understanding the economics is easier with data-driven insights. We've developed an ROI calculator to help you estimate profitability based on square footage, crop selection, and expected costs. The calculator factors in all expenses, from setup to ongoing costs, and projects your potential earnings over several years (including calculating your initial payback period).

By inputting variables like the size of your space, the types of crops you plan to grow, and expected yields, you can get an accurate estimate of how quickly your investment will pay off and what returns you can expect. This tool is essential for anyone seriously considering indoor farming as it removes much of the guesswork from the equation.

You can access our calculator here, or at the bottom of this page.

Indoor Vertical Farming as a Future-Proof Investment

Why Indoor Vertical Farming Is a Smart Long-Term Play

The world's agricultural needs are rapidly evolving. As urbanization continues, demand for local, sustainably grown produce increases. Indoor farming provides a solution that not only meets this demand but also positions you at the cutting edge of agtech innovation.

Here are 5 reasons why indoor vertical farming is future-proof:

1. Scalability -- Start small and expand as demand grows. Indoor farms can be scaled based on market needs, making them adaptable to fluctuations in consumer demand.

2. Sustainability -- Reduce transportation emissions by growing near consumers. Urban farms are environmentally friendly, cutting down on food miles and ensuring that produce reaches consumers faster and fresher.

3. Resilience -- Protect crops from extreme weather and climate change. Unlike traditional outdoor farms, indoor vertical farms are shielded from adverse weather conditions, ensuring consistent production even in volatile climates.

4. Market Demand -- Consumers increasingly seek locally grown food. As farm-to-table dining and local sourcing gain traction, indoor farms are perfectly positioned to meet this growing demand.

5. Profit Potential -- With the right crops, profits can exceed traditional farming. Indoor farms, with their controlled environments, can optimize production year-round, resulting in stable and predictable revenue streams.

The future of farming lies in efficiency, sustainability, and meeting consumer preferences. Indoor farming aligns with all these trends, making it a robust investment for forward-thinking entrepreneurs.

More interested in container farms vs. having a space already in place? Check out our article on the top 5 features of container farms here.

FAQ: Your Questions About Indoor Farming Answered

What is the cost of starting a farm?

The upfront cost for a farm can be as low as $1,000 per square foot depending on the size and customization level. Learn more about the setup process here.

How much can I earn from indoor farming?

The profit depends on your crop choice, with leafy greens and herbs offering up to $12.50 per plant site annually.

Where can I sell my produce?

Popular markets include grocery stores, restaurants, and direct-to-consumer channels.

Is indoor farming sustainable?

Yes, indoor farming minimizes food miles, reduces waste through precision agriculture, and can be operated with energy-efficient technologies.

Conclusion: Ready to Build Your Farm? Let's Get Started!

The economics of indoor vertical farming make it a compelling opportunity for those with unused space. With low upfront costs, manageable ongoing expenses, and multiple revenue streams, indoor vertical farming is not only profitable but also sustainable. Interested in turning your unused space into a profitable farm? Reach out to us today to discuss how we can help you build a custom farm that fits your goals.