Navigating Europe's Indoor Farming Future: Growth, Challenges, and Innovation

Indoor farming in Europe is entering a key growth phase, with both greenhouses and vertical farms adapting to changing market demands, rising urbanization, and the push for local food production. While greenhouses lead in scale and maturity, vertical farming is gaining ground—despite recent challenges—with a strong focus on automation and energy efficiency. Across the region, countries are following different paths, shaped by climate, policy, and infrastructure. This section explores market size, regional trends, crop focus, key players, and the technologies driving the industry forward.

Market Size and Growth Outlook

The indoor farming industry in Europe is entering a pivotal growth phase, with the market valued at USD 13.28 billion in 2024 and expected to expand at a compound annual growth rate (CAGR) of 12.9% through 2030, according to GrandView Research. This growth is being driven by rising urban demand for local produce, government incentives to reduce food miles, and technological advancements in controlled environment agriculture (CEA).

On a global scale, the greenhouse sector reached USD 25.48 billion in 2022 and is projected to grow at a CAGR of 9.9% through 2030. Greenhouses continue to dominate market share due to lower energy requirements and a mature infrastructure base in regions like the Netherlands (high-tech) and Spain (mid- & low-tech).

Meanwhile, vertical farming remains an area of high interest but mixed performance. Although the segment is forecasted to grow at a CAGR of 20% from 2024 to 2030, operational and financial challenges have slowed progress. Several high-profile companies, including Jungle (France), John Foods Company (UK), Smartkas (Netherlands), and Seasony (Denmark), have halted operations or restructured in recent months, highlighting industry volatility.

Nevertheless, investor interest in indoor farming remains relatively strong. In 2024, European indoor farming companies, across both greenhouses and vertical farms, raised approximately $102 million in disclosed funding rounds. Much of this capital is being allocated toward automation, AI integration, and improving scalability in response to labor shortages and economic headwinds.

Regional Insights: Europe’s Indoor Farming Hotspots

Western and Northern Europe remains the core driver of market activity, thanks to a mix of favorable climates, established agricultural infrastructure, and supportive policy environments. Across key countries, indoor farming has taken distinct trajectories:

Netherlands: A CEA Powerhouse

Over 40% of fresh produce is grown in greenhouses, cementing the country’s position as a global leader in controlled environment agriculture. The Dutch model combines advanced climate control systems, logistics efficiency, and robust export networks. Decades of growing under glass have made growers leading experts in high-tech greenhouse production, posing a hurdle to the adoption of growing in a completely controlled environment. A shift with CEA-tech offering on the supplier side can be reported.

Germany: Big Emphasis on R&D

Educational institutions and innovation hubs are playing a pivotal role in advancing CEA technologies. Cities are emerging as vertical farming hubs from an R&D perspective with Technichal University Munich and Humboldt University Berlin leading in research. Despite the market-shakeout in recent years, investments in urban farming concepts and public-private partnerships are still on the agenda; however, they need to prove significantly stronger business cases. The recent legalisation of Cannabis has increased the indoor farming applications throughout the country.

United Kingdom: Scaling Self-Sufficiency Post-Brexit

A growing number of vertical farming initiatives are being launched, with companies exploring retail partnerships and localised supply chains. Greenhouses, especially in southern England, remain integral to year-round vegetable and herb production.

Brexit has presented the urge for more self-sufficient food supply along the supply chain. The UK government has made tens of millions of pounds available in the past two years for greenhouse and vertical farming through grants, R&D partnerships, and energy transition funds. The sector is also newly eligible for major energy transition funding, further increasing available resources.

France: Incentives To Grow The Technology

Government incentives continue to support greenhouse projects, particularly in the west. Brittany serves as a major tomato production centre, while vertical farming has begun to gain traction in urban environments such as Paris and Lyon. Some technology providers are created but face

Spain: Another Greenhouse Powerhouse

The Almería region remains a dominant force in greenhouse-grown fresh produce, benefiting from abundant sunlight and a mature agricultural workforce. Spain is also witnessing early-stage exploration into vertical farming technologies tailored for Mediterranean climates. The planetary pressures, soil depletion and water shortages are creating the intensive need to shift production methodologies.

Scandinavia: Facing Food Security Concerns

The Nordic countries and Eastern Europe are beginning to emerge as secondary growth markets, driven by food security concerns and innovation funding. Scandinavia has had the lowest barriers of market entry when it comes to consumer acceptance, cost of operation and available technology. However, the total market size and population density is minor compared to the rest of European regions. Countries such as Sweden & Denmark are piloting both greenhouse and vertical systems, albeit at a smaller scale compared to Western Europe.

Crop Focus by Technology

Greenhouses:

• Fruiting crops such as tomatoes, cucumbers, aubergines, and bell peppers.

• Floriculture and leafy greens, including aromatics and lettuce.

• Commonly utilize hydroponic and at times aquaponic systems to enhance nutrient efficiency and reduce water usage.

Vertical Farming:

• Primarily leafy greens and herbs.

• Expanding into plant nurseries and experimental fruiting crops.

• Increasing deployment of hydroponics, aeroponics, and fogponics to improve root oxygenation and yield.

Key Players and Investment Activity

Established industry names include Ridder, KUBO, Van Der Hoeven, Certhon, and Priva, with newer players like IGS, Vertical Future, and LettUs Grow advancing smart technology adoption. Notable corporate movements include:

• Intelligent Growth Solutions (IGS): Secured new funding and partnered with ReFarm.

• GrowUp Farms: Announced a significant funding round.

• YASAI & GreenState: Merged to enhance operational synergy.

• TTA & ISO Horti: Merged in a strategic consolidation.

• Avisomo: Raised €5 million for its vertical farming tech.

• Albotherm: Received £500K grant for temperature-controlled tunnel innovation.

Technological Segments and Emerging Trends

Indoor farming continues to diversify across vertical farming, hydroponics, aeroponics, fogponics, and aquaponics, each offering unique benefits regarding water efficiency, nutrient delivery, and spatial optimization. Hydroponics remains the most widely adopted method due to its simplicity and scalability, particularly in leafy green production. Aeroponics, which involves misting plant roots with nutrient solutions, is gaining ground in high-tech facilities due to its superior oxygenation and reduced water usage. Fogponics, an emerging sub-variant of aeroponics, delivers nutrients through ultra-fine vapor and is being trialed for sensitive crops and early-stage propagation. Aquaponics, which combines hydroponics with fish farming, is drawing interest for its closed-loop sustainability model; however, it poses additional challenges to production systems.

Industry-wide trends include:

• Emphasis on scalable and modular business models to attract investment and reduce payback periods.

• Greater integration of renewable energy sources such as solar panels, biogas, and geothermal systems to reduce energy dependence and emissions.

• Widespread deployment of AI and automation for crop monitoring, climate control, and predictive maintenance to address labor shortages and enhance productivity.

• Increased M&A activity as companies seek consolidation to achieve economies of scale and access broader markets.

• Smart greenhouses are adopting automated irrigation, climate control, and energy-saving LED lighting systems to enhance operational efficiency.

There’s also growing interest in diversifying crop categories beyond conventional leafy greens. Companies are experimenting with agroforestry crops, floriculture varieties, and plant tissue culture within controlled environments. These innovations are driven by both market demand and a push toward high-value, niche products that can justify the capital intensity of indoor farming.

Challenges and Considerations

Despite strong growth projections, the European indoor farming industry faces a complex mix of structural and economic challenges:

• Macro-Economic Slowdown and Inflation: Rising inflation across the Eurozone, which reached 5.4% in 2023 before gradually easing, continues to impact input costs such as energy, labor, and transport. As energy prices remain volatile, especially in light of geopolitical tensions, operational costs for climate-controlled environments are significantly elevated.

• Funding Drought and Investment Concentration: According to AgFunder, global AgTech investment fell by over 44% in 2023 compared to the previous year. European indoor farming companies raised only $102 million in 2024, with the majority of this capital directed toward a few high-profile firms, leaving early-stage and mid-size players struggling for liquidity.

• International Competition: Vertical farms in Europe are under competitive pressure from lower-cost imports, particularly from greenhouse operations in North Africa and Southern Europe. The cost differential, driven by cheaper labor and natural sunlight, poses a barrier to price parity for locally-grown produce.

• High CAPEX and OPEX: Building and maintaining high-tech vertical farms can require capital investments ranging from €800 to €2,000 per square meter, depending on location and system complexity. These costs are often prohibitive without substantial government incentives or long-term contracts.

• Regulatory Complexity: The European Union's regulatory framework remains fragmented and often inconsistent across member states. Operators report frequent legislative changes that increase compliance burdens and delay project implementation. “Each new law aims to solve one issue and ends up creating six,” noted one industry insider.

• Shrinking Public Support: Government subsidies and grants, previously vital to industry growth, are becoming more limited. Many national and EU funding programs have narrowed their eligibility criteria or shifted focus toward broader sustainability and biodiversity goals, which do not always align with indoor farming models.

As the industry evolves, stakeholders must balance technological ambition with financial feasibility, manage regulatory risks, and identify value-added strategies to remain competitive in a tightening funding environment.

Conclusion

• Europe’s vertical farming market is still growing, with Germany, the UK, France, and Scandinavia as leaders.

• Economic challenges persist, especially around investment and energy costs, but falling energy prices and new technologies are improving viability.

• Smart greenhouses and climate control tech are major trends, with IoT and automation driving efficiency.

• EU funding and policy support are catalysing innovation and expansion, especially in urban centres, yet are currently stagnant on CEA-specific support.