Shibuya Redevelopment - Land Value Capture

Japan - Shibuya Redevelopment.jpg
Japan - Shibuya Redevelopment.jpg


  • This case study looks at how Transit Oriented Development (TOD) is undertaken in Tokyo, in one of the most densely populated urban environments, to successfully improve passenger experience and footfall.
  • Shibuya is one of the major railway terminals in Tokyo, with a daily ridership of 2.1 million people across eight railway stations.
  • The Shibuya redevelopment project looks at using TOD to gentrify the local area across the five urban schemes that make up the overall redevelopment: Hikarie Culture Core, Station Central, D?genzaka project, Station-South, and Sakuragaoka project. The project is being completed in stages.


  • The station and surrounding area had a lack of public space, leading to safety risks for users. The surrounding environment was heavily congested, with complex line transfers, insufficient capacity, and decrepit buildings – all of which needed to be addressed ahead of the Tokyo Olympics. 
  • Additionally, the vacancy rate of office space in Shibuya has been declining faster than the five central wards of Tokyo. Accordingly, average office space rental rates in Shibuya have been growing faster than in the five central wards.
  • Over the last decade, Tokyo’s spatial transformation has largely reflected urban revitalisation, a shrinking and aging society, inflated public debts, municipal budget constraints, and sustainable energy uses.
  • There was a desire to reduce the impact of redevelopment of the Shibuya railway terminal on the public budget.


  • To meet the need for improvements to the railway terminal and deliver additional public space and office space, a TOD approach was adopted. This development comprised of Shibuya Hikarie; Shibuya Station skyscraper; Shibuya Stream; Shibuya Station Sakuragaoka exit condos and offices; Cerulean Tower; New high-rise in D?genzaka; Shibuya Mark City; and the Shibuya scramble crossing.
  • The Shibuya program consists of three key types of works that were the responsibility of the following parties: 
  • Rail and Station Construction and Improvements – Railway Sector
  • Infrastructure Improvement – Public Sector 
  • Real Estate Developments – Private and Railway Sectors.
  • Value generated through the attached TODs was captured through a Land Value Capture (LVC) mechanism and used to subsidise the publicly-funded rail and station, and Infrastructure Improvement works.
  • Tokyo’s LVC mechanism can be categorised into two types, ‘Tax or fee-based’ and ‘Development-based’: 
  • Tax and fee-based LVC includes instruments such as property and land tax, betterment levies and special assessments, and tax increment financing (TIF). 
  • Development-based LVC includes instruments such as land sale or land lease, air right sale, land readjustment, and urban redevelopment financing. 
  • Tokyo’s LVC operates on a market freehold system that requires strong community ties or sufficient economic incentives. Consent from all landowners is sought, though the law allows the project agencies to implement schemes if more than two-thirds of landowners are secured. 
  • The collaboration involved in developing the plans for this comprehensive large-scale TOD required extensive consultation between the government, the public, non-profit organisations (NPO), developers, and experts.


  • Tokyu Corporation
  • Tokyo Land Corporation
  • East Japan Railway Co. and Tokyo Metro Co.


  • 2012 – Shibuya Hikarie finished – 43-storey high-rise on the east side of the station
  • 2018 – Shibuya Stream opened 
  • 2019 – Shibuya Scramble Square opened
  • 2020 – Shibuya Station renovation completed
  • 2027 – Whole redevelopment to be completed.

Results / impact

  • Tokyo’s railway companies adopted the LVC approach to generate real estate profits from the Shibuya Station TOD to fund development of the railway and associated infrastructure. Tokyu Corporation was one of the first to develop such LVC practices and is among the first to advance the business model of railway and new town co-development.
  • The TOD of Shibuya has created a step-change in the environment, creating a welcoming and vibrant area. For example, the nearby Futako-Tamagawa Redevelopment provided a population increase of 6% (a rate of 1.2 times the increase in Setagaya) and land price within 200 m of the redevelopment rose by 44.9% – a similar growth rate was anticipated for the Shibuya Redevelopment.
  • In recent years, the more inclusive strategic planning approach – ‘Public Involvement’ – has been progressively adopted to keep government policymaking and development criteria more accountable, encourage actions by private landholders that will deliver long-term community benefits, and deliver public-private partnership projects smoothly for long-term individual and societal interests.

Key lessons learnt

  • Rail lines in the central city can create value in the surrounding areas by improving accessibility and facilitating agglomeration of economies. This value can be enhanced through effective land use planning development of diverse real estate in the region, aligned with the market demand. The integrated land value approach can lead to increased passenger footfall and land value, as well as improved urban sustainability. 
  • Land readjustment is harder to execute in already built-up areas, as development regulations are inadequate for landowners to reassemble their properties and regenerate large capital gains from their land parcels. Thus, a stronger incentive mechanism is needed to endorse the profitability of second- or third-generation development activities and to ensure another development project is available for local governments and private stakeholders.
  • All stakeholders need to share a clear vision and take collective actions to face the macroeconomic and demographic trends of the future. Under market freehold systems, land readjustment and urban redevelopment schemes require inclusive decision making, which can be time consuming.
  • Railway businesses in Tokyo were attractive to investors and developers following their privatisation in 1987 and generated large capital gains during a period of rapid growth. In recent years however, attracting investors and developers has become harder, largely due to escalating construction costs, lengthening construction periods, increasing market competition among multiple rail lines and private automobiles and air services, and weakening real estate markets along new town corridors. All these factors require innovative financing, including development-based LVC.
Last Updated: 17 October 2021