Vertical Farm Basics and Overview

What Is a Vertical Farm? A Grower-First Guide to How They Work, the Types, and What Sets Them Apart

A vertical farm is not a technology for industrializing agriculture. More precisely, it is a production system in which people design the environment a crop grows in, shrinking the swings caused by weather and seasons.

Being able to control temperature, humidity, light, CO2, and nutrient solution is a major strength. At the same time, a vertical farm carries the costs of capital investment, electricity, and labor, so framing it simply as “the agriculture of the future” misreads the reality.

This article lays out, in one pass, what a vertical farm is, how it differs from open-field farming and protected cultivation, the main growing methods, and the business-side benefits and challenges.

The risks and safety of vertical farms are covered in detail in the article below.

Examining every risk of a vertical farm and diagnosing its safety

The basics of a vertical farm: a facility that grows vegetables under environmental control

A vertical farm, as the term suggests, is an enclosed facility that grows plants in a factory-like setting. Unlike an ordinary factory, what is produced is not an industrial product but vegetables.

What a vertical farm is — a “factory” that grows vegetables under environmental control

Specifically, temperature, humidity, light, CO2 concentration, and nutrient solution (water with fertilizer dissolved in it) are controlled to match the crop and its growth stage.

The aim is to create the growing conditions that stabilize quality and yield. Maximizing output while keeping quality uniform, and removing the uncertainty of weather, is the fundamental value of a vertical farm. When mechanical automation is layered in, it can also significantly reduce the burden of crop management tasks.

So how does growing in an open field or a plastic greenhouse differ from a vertical farm? The biggest difference is “the degree of environmental control.”

Open-field farming is heavily swayed by the natural environment — rain, wind, and sunlight. A plastic greenhouse can control the environment to some extent, but not to the level of a vertical farm. The defining strength of a vertical farm is that it can produce vegetables in a stable, planned way without being subject to the weather.

A brief history of the vertical farm

The prototype of the vertical farm goes back to 1950s America. At the time, research aimed at producing food in space gave rise to early efforts to grow plants in closed environments.

In the 1970s, research picked up in earnest in Japan as well. Concerns about food crises were rising, and there was demand for a stable food supply system. That said, early vertical farms were too costly to be put into practical use.

The vertical farm began to take off from the 2010s onward. The spread of LEDs cut electricity consumption substantially, and more cases became financially viable. Technology development aimed at labor saving and higher productivity continues today, and after more than half a century of R&D, the vertical farm is finally entering its growth phase.

Why vertical farms will become essential in the future

Two social challenges sit behind the demand for growing vegetables indoors: “stable food supply” and “climate change.”

On stable food supply: the world population continues to grow and is projected to reach nearly 10 billion by 2050. As the population grows, food demand expands, while farmland is finite and continues to shrink due to desertification and urbanization. In Japan, the aging of farmers and the shortage of successors are serious, and securing the people who will carry agriculture forward has become a real challenge.

The picture on climate change is also getting harsher. Extreme weather has become frequent in recent years and is hitting agricultural production hard. With record heat, prolonged drought, torrential rain, and powerful typhoons recurring, there are clear limits to what open-field farming can do for stable supply.

The vertical farm is seen as a way to address both this growing instability of food supply and the production risks posed by climate change.

The three forms of agriculture: comparing open-field farming, protected cultivation, and the vertical farm

A vertical farm is just one form of agriculture. Putting it side by side with the other forms makes its character much clearer.

The three forms of agriculture and combinations of growing methods

Broadly, agriculture splits into three types: open-field farming, protected cultivation, and the vertical farm. The table below organizes which growing methods suit each.

• ◎: Best fit
• 〇: Suitable
• △: Possible under conditions (limited)
• ×: Not suitable

Facility types

• open-field farming
  • Cultivation in outdoor fields with no roof or walls. It uses sunlight, rainwater, and other natural conditions, and requires a wide land area.
• protected cultivation
  • Cultivation using facilities with roofs and walls, such as plastic greenhouses or glass greenhouses. It softens the impact of outside air and allows temperature and humidity to be controlled to a degree. Production is more stable than in open-field farming. It requires the cost of building and maintaining the facility.
• vertical farm
  • In a closed space, the growing environment can be artificially controlled. Light, temperature, humidity, CO2, and nutrient solution can be optimized, enabling year-round, planned production unaffected by the weather. Advanced equipment, technical know-how, and high operating costs are required.

Growing methods

• Soil cultivation
  • Plants are grown in soil. Basic crop management tasks such as fertilization and watering are needed. Widely used in open-field farming and protected cultivation.
• Hydroponics
  • Plants are grown without soil, using only nutrient solution. It is clean, with fewer pests and diseases, and crops grow quickly. It requires advanced nutrient solution management and is mainly used in vertical farms.
• Solid medium
  • Solid media such as coconut coir or rockwool are used. It draws on the characteristics of both nutrient solution and the medium. It is easier to manage than hydroponics and is used in protected cultivation and vertical farms.
• Aeroponics
  • Nutrient solution is sprayed onto the roots as a mist. This aeroponic method delivers high oxygen-supply efficiency at the roots. It requires advanced environmental control and can only be used in limited settings such as vertical farms.

Some readers may wonder, “Are vegetables grown in a vertical farm safe?” The “factory” wording naturally invites that question, but once you understand how it works, the safety concerns largely fall away. For details, see the article below.

How do vegetables change when grown with hydroponics? An easy-to-understand explanation of the risks

Comparing the differences between facility types

The differences between open-field farming, protected cultivation, and the vertical farm show up in the degree of environmental control, in productivity, and in cost.

Key points by item

• Environmental control:
  • The vertical farm controls temperature, humidity, light, and CO2 to a high degree, building the optimal environment for crop growth. Protected cultivation allows some degree of environmental control, while open-field farming depends on the natural environment.
• Productivity:
  • The vertical farm achieves the highest harvest per unit area. Protected cultivation is more productive than open-field farming but does not match the vertical farm.
• Quality:
  • The vertical farm produces uniform quality, and it is also possible to control nutritional value and functional compounds. Open-field farming is swayed by the natural environment, so quality varies.
• Cost:
  • Open-field farming has low initial investment, while the vertical farm carries heavy costs in facility construction, equipment, and operations. Protected cultivation sits between the two.
• Environmental impact:
  • The vertical farm sharply reduces water and pesticide use per unit area. On the other hand, energy consumption is large. Open-field farming requires wide land and places a heavy environmental load through pesticides and fertilizers.
• Stability of supply:
  • The vertical farm enables year-round production unaffected by the weather, so supply is stable. Protected cultivation is also relatively stable, while open-field farming is heavily swayed by weather and seasons.
• Resilience to climate change:
  • The vertical farm is little affected by extreme weather and is strong against climate change. Protected cultivation has more resilience than open-field farming, but not as much as the vertical farm.
• Crops grown:
  • Open-field farming centers on seasonal vegetables. Protected cultivation allows a wider range of crops. The vertical farm centers on leafy greens, but functional vegetables are also relatively easy to produce.

How the vertical farm works

The classic image of a vertical farm is a multi-tier setup with shelves stacked top to bottom and vegetables packed in. Hydroponics is widely adopted in this kind of setup. That said, growing methods other than hydroponics also exist.

Comparing growing methods (vertical farm)

Because the vertical farm is sealed off from outside air, it pairs extremely well with hydroponics, which is widely adopted. Beyond that, solid-medium cultivation and aeroponics also make use of what the vertical farm offers.

Comparing the differences between facility types (vertical farm)

Beyond growing methods, vertical farms can also be classified by whether they use sunlight or artificial light. This difference flows directly into electricity costs, equipment costs, and labor costs, and largely shapes the profitability of the business.

Including open-field farming, the four categories — Greenhouse, Hybrid, PFAL (Plant Factory with Artificial Lighting), and open-field farming — are compared below.

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Note: This vertical farm data is based on the results of the 2025 (Reiwa 7) “Survey on Large-Scale Protected Cultivation and Vertical Farms” conducted by the Japan Greenhouse Horticulture Association.
Note: Open-field farming varies widely by weather, location, operation size, and crop, so it cannot be compared by numbers alone.

Looking at the vertical farm as a business

Stable supply, high quality, and lower environmental impact have made the vertical farm a focus of attention as a business opportunity. That said, there are many challenges, and entering the field does not guarantee success. If you are considering entering the vertical farm business, you also need an accurate read on the drawbacks.

The benefits and drawbacks of a vertical farm. I’ll tell you everything I learned on the floor

The challenges a vertical farm faces

The vertical farm still carries many challenges. Cases of large companies entering and quickly withdrawing keep happening, and the issues below sit behind that pattern.

The real reason large companies launch a vertical farm and pull out soon after

For PFAL in particular, only about 50% of operators are profitable or break-even on the most recent results, which is a tougher business picture than Greenhouse and Hybrid (both above 70%). The structural burden of electricity costs is the main reason for that gap.

• High initial investment and running costs:
  • Building a vertical farm requires substantial initial investment in facilities and equipment. Running costs such as electricity and HVAC also tend to be high compared with conventional agriculture. In particular, PFAL uses a great deal of electricity for LED lighting and HVAC, so cost reduction is a major challenge.
• Advanced cultivation know-how and a shortage of people:
  • In a vertical farm, plant physiology and environmental engineering have to be put to work to grow vegetables efficiently. Yet people with this knowledge and experience are in short supply, and developing them is an urgent task.
• Limited crops and varieties:
  • The crops that can currently be grown in a vertical farm are limited. Leafy greens such as lettuce dominate, and many crops — grains like rice and wheat, fruit trees, and root vegetables — remain difficult to grow.

R&D around the world is tackling these challenges of high cost, the people shortage, and the narrow crop range. Development of vertical farms that use sunlight, and the introduction of AI-based environmental control systems, are among the technical advances aimed at energy-saving and efficiency.

That said, it cannot yet be said that new technologies such as AI and automation are fully operational in the field. Many parts still rely on human hands, and the vertical farm remains an industry that is still developing.

What insiders never say out loud — the real challenge of a vertical farm is “people don’t stay”

How to think about making a vertical farm business succeed

To succeed in a vertical farm business, what matters is not just investment in technology and equipment, but how you face the market.

What you need first is to be clear about who you are delivering what kind of vegetables to. Are you supplying high-value herbs and baby leaves to nearby restaurants, shipping leafy greens with consistent quality to supermarkets, or delivering functional vegetables to health-conscious consumers? Change the target, and the crops to grow and the cultivation design change completely. Companies entering from other industries tend to fall into a “sell what we made” mindset, but without a “make what will sell” perspective, surviving in the market is hard.

Differentiation from competitors is also essential. New entries into the vertical farm business are increasing, and once you are pulled into a race based on indistinguishable products, price pressure follows. You need to define early on where you draw the line — quality, varieties, service, brand story.

On top of that, the vertical farm has a structure where it is hard to turn a profit without a certain scale. Because technology in this field also moves fast, an attitude of continuously taking in the latest technology and market information, and pursuing both higher production efficiency and cost reduction at the same time, is required.

The breakthrough for cracking the high cost of a vertical farm is “scaling up”