TOKYO -- Tokyu Corp., a Tokyo-based private railroad operator and developer, is spending billions of yen on urban renewals in the Shibuya area, one of the world's busiest districts. New buildings and facilities with shops, restaurants, offices and entertainment spots are being constructed to make the area even more attractive to a wider range of visitors. The company plans to complete most of them before the city hosts the Olympic and Paralympic Games in 2020.
After midnight on a typical Friday, people wait at the intersection in front of Shibuya Station, said to be the busiest pedestrian crossing in the world, and rush to the station to catch the last train home. Those who stop to look up can see massive cranes rising at a huge construction site next to the station.
The site is just above the relocated underground platforms of the Toyoko Line, operated by Tokyu, where a 47-story building is slated to open by fiscal 2019. The 230-meter-high business and entertainment complex will be the tallest building in Shibuya.
At the other side of the station, where the Toyoko Line platforms were previously located, a 180-meter-high, 35-story building is scheduled to open by March 2020. A 16-story office and residential complex is expected to be finished by March 2018. These renewal projects will boost Tokyu's rental floor space to roughly 1.3 million square meters by March 2021, up about 30% from March 2015.
Tokyu plans to spend as much as 180 billion yen ($1.58 billion) over the next five years on renewal development in the district.
The area has been a center of fashion and culture focused mostly on young people, earning a stereotype image that has kept many older and wealthier visitors away. Ryosuke Toura, an executive manager at Tokyu, says the area lacks capacity to satisfy the needs of large corporations. Google's Japan unit relocated from Shibuya to the Roppongi district in 2010. Once businesses reach a certain size, they tend to leave Shibuya in search of more space.
Hub of transport, culture and business
Shibuya Station is the core of Tokyu's rail network and the starting point of its two major lines that stretch south to Kanagawa Prefecture. The Toyoko and Den-en-toshi lines together carry more than 70% of the company's total passengers.
"We should start by making the core location attractive," says Hirofumi Nomoto, Tokyu's president. "Then this will help develop the areas along the rail line."
Shibuya is also home to many information technology startups. Tokyu Group is working to develop a local environment that will help new businesses grow. As part of the effort, it launched a support program for startups last year. Teaming up with Aquabit Spirals, one such startup, Tokyu Corp. conducted a pilot marketing program earlier this year at Shibuya Station and nearby. By using smartphones to scan a poster, people were able to access useful information about the area. The two partners will seek further opportunities to work together from April.
On Feb. 10, Tokyu Corp. announced a plan to increase its stake in group company Tokyu Recreation, from about 24% to more than 50%, aiming to make the unit a subsidiary. Shinzo Kanno, president of Tokyu Recreation, which operates movie theaters, says it's considering building Japan's biggest cinema complex in Shibuya.
Shibuya was once the center of a mini-theater boom, with many small, unique movie theaters. But it has been overtaken over the years by the Shinjuku district, where many cinema complexes have popped up. Tokyu Group aims to combine movies and other entertainment to make Shibuya more attractive.
Tokyu Corp. estimates the Shibuya renewal projects will bring the company major financial benefits. The company forecasts 69 billion yen in group operating earnings for the fiscal year ending March, with its real-estate business accounting for as much as 26.6 billion yen. The group expects the real-estate business to be its biggest growth driver in about five years.
Urban development can also boost transportation revenue. Together with group company Tokyu Land, Tokyu Corp. opened Futako-Tamagawa Rise, a shopping complex attached to Futako-Tamagawa station in the south of Tokyo, in 2011. New facilities have been added to the complex over the past year or so, including an office building housing the headquarters of Japanese online retail giant Rakuten. This increased the number of workers in the area by 10,000, and passenger traffic at Futako-Tamagawa Station rose about 20% from a year earlier.
Seeking new areas
Tokyu Corp. has specialized in increasing the attractiveness of core locations first, and then boosting transportation revenues and land prices in surrounding areas. It's now looking to leverage the strategy for airports. In February, the operation of Sendai Airport in Miyagi Prefecture, northern Japan, was quietly turned over by the government to a consortium led by Tokyu Group. This was the first case in which the government sold the right to operate an airport to private-sector interests.