In recent years, the UAE’s market for fresh vegetables, leafy greens, and salads has seen remarkable growth, thanks to a rising trend in local production.

Vertical farming has become a particularly promising sector, valued currently at $39.2 million, with projections indicating it could grow at an annual rate of 4.05%, reaching $47.8 million by 2029.

For entrepreneurs and investors, vertical farming offers a unique opportunity to tap into the high demand for locally grown, pesticide-free produce. Vertical farms use up to 95% less water compared to traditional farming, making them an efficient choice in the UAE’s arid climate.

In this guide, we’ll explore:

• the initial startup costs for vertical farming in the UAE
• key operational expenses, including energy and labor requirements
• production costs and profitability potential in the UAE’s vertical farming market
• the role of automation in managing costs and increasing efficiency

Establishing a vertical farm involves two major initial costs: securing the facility and obtaining the necessary equipment.

Many vertical farming startups repurpose warehouses, shipping containers, and industrial spaces to optimize urban locations and save on real estate expenses.

Some entrepreneurs begin with small-scale vertical farms to grow high-demand crops like microgreens, which require minimal space. Meanwhile, larger facilities support higher yields and a broader range of crops.

The vertical farm in Dubai features 712 m² of growing space and an output of 3.2 tonnes of leafy greens and microgreens monthly. This semi-automated farm employs iFarm Multigreens technology with a Flood & Drain hydroponic system. This setup allows farmers to grow leafy greens, baby leaves, and microgreens in the same space, providing flexibility to cultivate various herbs and salad mixes.

The setup and activation of iFarm Vertical Farm Rack technology is approximately AED 3,672 per m² (around $1,000). Note that actual costs can change based on farm size, building conditions, and specific equipment needs.

A 1,000 m² growing area (with a 500 m² floor space and 4.5-meter height) may require a capital expenditure of around AED 3,672,000 (roughly $1 million), excluding building construction, renovations, logistics, and customs fees.

To gain insight into which components are included in calculating the setup costs of an indoor vertical farm, consult the table below:

The iFarm Cost Calculator allows you to explore different vertical farming scenarios, helping you understand capital expenditures and estimate the potential payback period.
With this tool, you’ll receive:

• an estimate of the required growing area
• power requirements
• average electricity and water usage
• investment amount
• estimated monthly costs

Running a large-scale vertical farm is both financially and technically demanding. Energy and labor are among the most significant expenses.

In vertical farming, energy expenses are substantial, with LED lighting accounting for up to two-thirds of the total energy cost.

Since farms require climate control due to limited airflow, air conditioning and humidity control contribute significantly to the power bill.

In contrast, energy costs for farm operations like fertigation and automation make up less than 10% of the total bill.

For example, a rack vertical farm with a growing area of 1,000 m² in the UAE producing lettuce and herbs with iFarm Leafy Greens technology could consume around 3,630 kWh per day. The monthly electricity bill would be approximately AED 24,000 (about $6,500). While these costs are nearly half of what they would be in Europe, they are similar to those in Saudi Arabia.

Relatively affordable electricity is a key factor contributing to the expansion of vertical farming across the GCC region.

Switching to automated vertical farming systems can further reduce energy consumption. Systems like the iFarm StackGrow, with mobile trays that minimize light usage, are around 30% more energy-efficient than traditional rack systems.

Several other factors can impact electricity costs in vertical farming, including the efficiency of LED lighting, the specific light requirements of each crop, and the availability of subsidies from government or utility providers.

Learn more about effective strategies to reduce energy use and minimize electricity expenses in vertical farming here.

Labor costs are often a significant part of operational expenses, potentially accounting for up to 60% of total costs.

To calculate labor costs, let’s take as an example a mostly-manual large vertical farm built with iFarm Leafy Greens technology with 1.000 m² of cultivation area located in the UAE. Workers here would manage tasks such as:

• sowing seeds
• moving cassettes and pots
• disinfecting and cleaning
• harvesting salads and greens
• packaging
• equipment maintenance

On average, monthly labor costs for such a farm would reach approximately AED 101,388 ($27,604), assuming a standard UAE farm worker salary of AED 7,350 ($2,000).

The required workforce largely depends on the farm's level of automation; while higher automation increases initial setup costs, it can considerably lower monthly operating expenses over time.

However, full automation isn’t always the ideal choice. Smaller farms or those in regions with low labor costs may benefit from semi-automated systems too.

In regions where labor costs can be significant, fully automated systems, such as iFarm StackGrow, can be an optimal solution for large-scale vertical farms. StackGrow handles sowing, watering, pallet movement, cutting, and packaging with minimal to no human labor.

Calculating capital and operational expenditures and payback time is essential to understand the financial prospects of vertical farming. Here, we’ll examine a UAE-based farm using iFarm Leafy Greens technology.

This model includes a 700 m² facility with 1,331 m² meters of cultivation area, designed for lettuce (70%) and herb (30%) production. With this layout, the farm’s monthly yield is projected at approximately 8,087 kg, with products sold as 40% potted and 60% cut greens.

According to UAE market rates, herbs are priced around AED 62.50 ($17) per kg, lettuce at AED 47.70 ($13) per kg, and potted greens at AED 4.04 ($1.10) per unit. Monthly revenue is thus estimated at AED 529,000 ($143,971).

Monthly expenses, including labor, utilities, supplies, and rent, total approximately AED 349,880 ($95,270), resulting in an EBITDA of AED 170,139 ($46,323).

With these earnings, the investment in iFarm technology and equipment could be recovered in about 2.3 years. Note that these calculations exclude costs for building, renovations, and imports.

A thorough market research can help you get a customized cost projection and align it with your business goals.