Urban agriculture gains momentum
- November 1, 2020: Vol. 7, Number 10

Urban agriculture gains momentum

by Dan Martin

Growing food indoors — in or near urban markets — is an expanding market that is likely to grow through the years ahead. It has already influenced commercial real estate, intrigues many economic development professionals, is sustainable and can create local food security threatened by climate change. For commercial real estate it has been a successful reuse of closed big-box stores and possibly malls, too. In addition, acres of metro industrial and brownfield sites have been developed into well over 1 million square feet of indoor growing space. This construction is no longer a mystery, as large design/build firms have constructed hundreds of thousands of square feet of hydroponic cultivation facilities for commercial pot cultivation facilities as legality has spread.

The two drivers of these ventures are farmers and local parties with an interest in repurposing existing buildings. Also driving the trend is consumer expectations of a broad selection of fresh, locally produced food. Well-funded indoor farming successes that guarantee a year-round supply of fresh food close to cities include Mighty Vine, Gotham Greens and Bright Farms.

Mighty Vine has completed three of four phases of a 30-acre greenhouse that will annually produce 105 million tomatoes over the course of a full year. Currently, they successfully operate a 22-acre greenhouse 80 miles west of Chicago.

Eight-facility Gotham Greens started atop two Brooklyn buildings, one a Whole Foods. The most recent five facilities were developed on industrial and brownfield sites, where its plants are grown hydroponically rather than in soil. Three facilities are in New York. The first out-of-town venture, in Chicago, was built atop a southside soap factory. Chicago added a ground-level greenhouse, as did its locations in Baltimore, Denver and Providence, R.I. The four new facilities were each about 100,000 square feet per facility, and each can each turn 6 million heads of lettuce a year.

Bright Farms, specializing in baby greens, has four greenhouses up and running and a fifth coming. The largest, at 280,000 square feet, is 150 miles west of Philadelphia with other facilities west of Chicago, in Ohio between Cincinnati and Columbus, and in Culpeper, Va., southwest of Washington, D.C. Its next facility is slated for Hendersonville, N.C. All three have developed brands and sell product to some of the country’s largest grocery companies: Albertson’s, Kroger, Walmart, Whole Foods/Amazon, and others.

Another approach, smaller indoor facilities, around 2,500 square feet, can fit in stores or even transit hubs and retail directly to the public and fulfill custom orders.

Indoor farms can align closely with many green goals, both in connection with climate change and brownfield site reuse. Small facility models can work well in food deserts.

All of these examples of growth and change are opportunities for developers, “green” investors, entrepreneurs, community develop organizations, grocers, ag-tech startup companies and farmers.

The U.S. agricultural economy is enormous. Here’s a quick two-paragraph briefing on how we got to today’s farm economy.

Today’s farms average about 450 acres, and technology, including crop genetics, chemicals and equipment, have led to a tripling in yields between 1948 and 2017 even as farm labor has declined. This has caused rural populations to shrink as the nation has urbanized.

Gross income from farming has been growing, moving from $333 billion in 2000 (in 2020 dollars) to $431 billion projected for 2020. This includes substantial farm program payments from the U.S. government. Net income (including dollars and government credits) is projected to be about $97 billion in 2020, about 22 percent of gross. The U.S. Department of Agriculture covers corn, soybeans, wheat and other grains with substantial grants and loan programs. The result is a flipped food pyramid where fruits and nuts, melons and vegetables earn less than 25 percent of crop cash receipts.

The effort to move away from outdoor soil-based farming toward urban farming is also driven by technology and efficiency. Urban farming has a number of advantages, including direct access to customers, shorter transport routes, fresher food, control over the growing environment, less or zero need for genetically engineered seeds and use of pesticides, less water usage, year-round growing, and local jobs. Traditional outdoor farming is increasingly vulnerable to unpredictable weather changes. Stories that illustrate this include: the vast area impacted by Midwestern floods during 2019, regional droughts and fires in California and other western states.


Water is the key ingredient. While we have done it for millennia, growing outdoors wastes a lot of water. Aquifers and rivers usually supply a finite amount. Growing indoors cuts water consumption by as much as 90 percent. Arid locations such as Las Vegas, Phoenix and other sunbaked cities take note. With soil-based farming, as much as 99 percent of the water used in traditional outdoor irrigation evaporates, contributing almost nothing to plant development. Overall, crops account for 92 percent of all human water consumption.

Today’s rural industrial-scale farms use soil as the grow medium. It is fortified with fertilizers and pesticides. Most soil lost its nutrient value long ago. In many places, annual floods brought fresh topsoil. But now, except for extreme-weather floods, these rivers have managed or controlled flow.

Packaging, food quality and shipping soil-grown crops great distances to consumers are all subject to climate change and sustainability issues. Rural agricultural runoff issues for soil-grown crops have also led to water contamination. Communities along Lake Erie’s shore lost their water supplies when agricultural runoff of fertilizers and pesticides fueled algae blooms, making the lake’s fresh water undrinkable. Similar runoff problems have rendered many local water supplies insufficient or useless.

Fresher food can taste better too. Heirloom tomatoes and other fruits and vegetables not suitable for today’s industrial food production and transportation, are popular again. Urban agriculture fruits and vegetables are effectively organic for lack of pesticide use.


There are a lot of challenges with urban ag, some of which can be addressed by cities. Land, development costs and utilities can be higher in urban areas. Not all crops can be grown in urban or indoor settings, as many grains require government price supports. Cities have permitting and other regulations that rural areas do not. Proponents of agricultural development can help guide city staff more efficiently through this unfamiliar business. Urban farming risk management can baffle insurers and other standard business line items. Similarly, while urban farming is constantly evolving and getting technologically stronger than ever, it still takes time to get the balance of nutrients and fertilizer right, especially in aquaponics, before production could begin in volume.

Nevertheless, as illustrated, urban farms can operate successfully. Unlike their rural cousins, the indoor facilities — greenhouses or spaces using artificial lights — produce year-round and provide a sustained local food supply. Urban farms eliminate two critical business model risks: food security and climate change’s likely impacts on long-distance growing and shipping.


Urban farms are generally much more productive per square foot than rural ones. Using local soil as a growing medium is not typically desirable nor necessary in urban areas. Soil in urban areas can be too contaminated for food production. The use of hydroponics and aquaponics (any system that combines traditional aquaculture with hydroponics) eliminate the need for soil.

Aquaponics can double as a food production system for both fish and plants. Both are raised in a continuously looped system. The fish waste, typically from tilapia (which grow quickly and are a salable fish), is captured from the fish tanks, where it can be broken down into nitrates by naturally occurring bacteria, before being used under the plant growing beds as fertilizer. The plants contribute to the water quality for the fish by filtering and oxygenating the water, which cycles back to the fish tanks.

Hydroponics uses water-based nutrient solutions fortified with essential minerals. The plants are grown in frames for support. Many plants can be grown this way, including root vegetables such as carrots and potatoes.

A downside to hydroponics and aquaponics is on the front-end of the development. They are both expensive. The cost of building the production facilities is much higher than preparing, tilling and seeding a field. Flexible space requirements make both approaches of growing in hydroponic solution well suited to urban settings. Fresh water is plentiful in some urban areas, especially those in the watershed of the Great Lakes and communities along rivers, thanks to the Clean Water Act of 1972.

From an urban development perspective, urban farming can go anywhere, whether into new construction, old buildings or disadvantaged areas where economic development programs can help reduce costs and create jobs. Every city has sites with these characteristics. By operating close to customers and having direct, even personal, relationships with them, the commercial producers can cut out the middlemen typical for a commercial food supply chain.


The 100,000-square-foot hydroponics wholesale vegetable factories that have been developed sometimes use stacked trays or other vertical approaches to indoor farming. Smaller facilities can sell directly to the public at retail prices, capturing more of the food supply chain profit. The smaller facilities, which can pick-to-order for drive-up customers or commuters getting off of trains, require more labor but can give customers exactly what they want, meaning a consistent array of foods must be available.

A hybrid of this model is to grow food for consumption in a section of a grocery store. One of Kroger’s chains, Fred Meyer in the Pacific Northwest, has tried this. The currently enormous size of grocery stores supports this idea. Grow areas for some produce — fresh basil, special lettuces and tomatoes among them — can generate sales per square foot that can meet the sales-per-square-foot target for these large stores.

Overall, urban agriculture is moving out of infancy and into the mainstream, with a number of different business models and opportunities.


Dan Martin ( is managing principal of Market & Feasibility Advisors.

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