Three years ago, vertical farming was going to save Australian food production. Indoor growing, freed from weather and season, using a fraction of the water. Investors poured money in. Headlines were breathless. The future of food was stacking up in warehouses from Melbourne to Perth.

The reality in early 2026 is more complicated and more interesting than the hype suggested.

The promise

The pitch for vertical farming in Australia was compelling. We have water scarcity issues, long distances between growing regions and population centres, and increasing climate volatility affecting traditional agriculture. Growing food in controlled environments near urban centres seemed like an obvious solution.

Companies like Stacked Farm, InvertiGro, and Sprout Stack attracted significant investment. State governments offered grants. Supermarkets signed supply agreements. Everything pointed upward.

What happened

Some of it worked. Some of it didn’t.

The failures have been instructive. Several high-profile vertical farming operations have scaled back or closed in the past 18 months. The reasons are consistent: energy costs, limited crop economics, and a business model that only works for a narrow range of products.

Here’s the core problem: vertical farming is expensive. The energy required for artificial lighting and climate control makes it difficult to compete with traditional farming for most crops. Growing lettuce indoors when you can grow it outdoors in the Werribee plain for a fraction of the cost doesn’t make economic sense unless you’re selling to a premium market that values year-round consistency.

Electricity costs in Australia — which are higher than in many other countries — make this worse. A vertical farm in Melbourne pays significantly more for energy than a comparable operation in the Netherlands, where energy is cheaper and the growing season is shorter (which strengthens the case for indoor production).

Where it’s actually working

Despite the shake-out, some vertical farming operations are thriving. The key is product selection.

Leafy greens and herbs. These work because they grow fast, they’re lightweight, and they command decent prices. A vertical farm that focuses on mixed salad greens and basil for Melbourne restaurants can compete on freshness — harvested in the morning, on a plate by dinner. That’s a genuine advantage over Gippsland or Queensland-grown lettuce that’s been in a truck for hours.

Microgreens and speciality products. The high-value, low-volume market is viable. Restaurants pay premium prices for consistent quality microgreens, edible flowers, and specialty herbs that are difficult to source conventionally.

Strawberries. One of the more interesting developments. Several Australian operations are now successfully growing strawberries vertically, and the economics work because Australian strawberry prices are high enough to absorb the production cost.

The technology angle

The operations that are surviving have invested heavily in automation and data. Sensors monitoring every aspect of the growing environment, AI-optimised lighting schedules, and predictive models that adjust nutrient delivery based on plant growth patterns.

This is where the technology gets genuinely interesting. Some Australian vertical farms are working with AI consultants in Melbourne to develop predictive systems that optimise yield per square metre while minimising energy consumption. The data from these controlled environments is incredibly rich, and the AI applications are practical rather than speculative.

Robotics is playing a role too. Automated harvesting, planting, and monitoring systems are reducing labour costs, which was another major challenge for the industry.

What this means for Australian food

Vertical farming isn’t going to replace traditional agriculture. Anyone who told you it would was selling something. But it’s carving out a legitimate niche in the Australian food system.

The most realistic vision for vertical farming in Australia looks like this: urban and peri-urban operations supplying fresh, high-quality salad greens, herbs, and specialty produce to nearby restaurants and retailers. Not feeding the nation, but filling specific gaps in the food supply where freshness, consistency, and reduced food miles matter.

That’s a less exciting story than “the future of food.” But it’s honest, and the operations building on that foundation are the ones that’ll still be here in five years.

For consumers

You’re probably already eating vertically farmed produce without knowing it. Many restaurants in Melbourne and Sydney now source their greens from indoor farms. Some supermarkets stock vertically farmed herbs.

Is it worth seeking out? For herbs and delicate greens, yes. The freshness difference is noticeable. For staple vegetables, no — traditional farming does that better and cheaper.

The industry is finding its feet. Let it.