Vertical farming has the possibility of becoming the next big agricultural trend in Canada.

“SILENT RENTERS”

While a detective in the Calgary Police Drug unit in the mid 1990’s, our team ran a large-scale marijuana grow investigation over the span of a year or more, covering a group based in western Canada. The illegal grower’s pet term for the plants were “silent renters” since operations were set up in basements with the caretakers residing on the upper floors. Their boast was that these renters never caused any fuss or generated any noise complaints, yet ALWAYS paid on time. It was an extremely lucrative although illegal business generating millions of dollars of income, as a peek at the balance sheets of the now legal cannabis producers will readily attest.

“THINKING BIG”

While the initial capital outset and ongoing energy costs of vertical farming are very considerable, the return on investment (ROI) could be equally profitable for a well-funded, large-scale corporate operation. The reasoning behind the idea is both sound and doable.

The demand for perishable food products increase each year, hand in hand with retail prices. Product transportation to market, always a major concern in any large venture is virtually eliminated when the produce is grown locally and positioned only blocks or a few tens of kilometers distant from the end consumer. Close proximity results in another plus; guaranteed product freshness and quality, combined with smaller minimum orders and a reduced need for retail storage, a boon for smaller food retail operations or even corner stores. Remember, depending upon the crop being grown, harvest intervals between 15 to 60 days would be the norm while staggered harvests would supply a consistent supply of produce on a weekly basis no matter the time of year.

At present the major challenge of indoor farming centers about the ongoing energy costs in providing 24/7 light for the crops and account for nearly 25% of all operating costs, but as low energy use lighting technologies continue to improve, these costs would shrink over time. Another fact about lighting, it produces a byproduct; heat. Heat that is siphoned away from the operation and usually vented into the surrounding air when instead the excess heat could contribute to warming the rest of the building, driving down heating costs. Costs could again be reduced further by replacing the exterior windows on the high rise with solar panels. Panels that could be manufactured in Canada, panels whose manufacture might qualify for a government grant or subsidy? Mr. Trudeau, if you’re looking for an eco-green legacy, this might fill the bill.

Another factor of vertical farming deals with labor costs making up approximately 50% of the farm’s operating expenses. Automation of such an operation is expensive, but far less involved than say the degree of technology required to operate an online warehouse. Perhaps its time to consider a blend of automation and human labor.

Now this is precisely why I mentioned the “silent renters” of the 1990’s.

Imagine a situation where active seniors, physically disabled persons, and or individuals of diminished intellectual capacity might find employment in a safe, secure and supervised work environment offered within an indoor farm operation. Now imagine that same person having the option of residing in a subsidized apartment within that very building.

Please keep in mind I’m not for a moment advocating a “slave labor or indentured service” situation, but one that benefits both the individual as well as the corporate entity. A fair income and a job that promotes an individual’s self-esteem and sense of self worth is a worthy goal and one which would benefit society as a whole. Corporate studies have shown time and again; that employers of these groups are highly satisfied with both their work ethic and attention to detail. An often-overlooked residual benefit would be one of a low personnel turnover, a continual challenge to any business model.

What about the relative profitability of such an operation?

Consider a typical downtown office tower having an average of 25,000 square feet per floor. Avison Young, a commercial real estate advisor, reports annual rental revenues averaging about $18 per square foot providing a return on investment somewhere in the range of 8 to 12%. Keep in mind the rent usually covers building maintenance, associated costs, negotiable interior development required by each tenant, along with taxes and a reasonable rate of return for the buildings’ owner.

According to suppliers of specialized farming equipment, a price per square foot average approaches $170 per foot when ready-made commercial equipment is utilized. Here again, this cost could probably be halved if the basic materials were purchased and assembled on site. Let’s face it, if the illegal marijuana growers in the 1990’s could put a secret, viable farm together, how might a team of STEM graduates make out? (STEM stands for science, technology, engineering and mathematics)

Assuming the costs come in near $90 per square feet, the equipment required for a twenty five thousand sq. ft. floor of an office tower works out to about 2.25 million dollars. Spread over a useful life of 10 years, this initial capital outlay becomes much less of a factor. This is especially true if the shell of a vacant office building is utilized to contain the farm.

While each crop will differ in final cost per pound, I was surprised to see the industry pegging the average annual revenue generated close to $40 per square foot or about $1 million dollars per year for our 25,000 sq. ft. high-rise farm.

I’m pretty sure most owners of a now vacant office building might jump at the chance to rent out the space to a viable, long-term commercial tenant with a steady income stream and unlimited demand for their eco-green product.

For more information, I suggest starting out reading a neutral source, “Basic Knowledge 101”, you can reach their site at https://www.basicknowledge101.com/subjects/verticalfarming.html

Thanks for reading.