Tokyu — Company History

The Great Kanto Earthquake creates suburban demand, and Den-en-chofu is born

In the Kansai region Hankyu Railway had succeeded with a model in which the railway creates its own passengers, but in Kanto no operator had moved into suburban electric railways at all. In September 1922 Goto Keita (五島慶太) founded Meguro-Kamata Electric Railway with capital of ¥3.5 million and began building the line from Meguro through Den-en-chofu to Kamata. The Great Kanto Earthquake of September 1923 enlarged the demand to move from the city centre out to the suburbs, and schools and housing pushed into the area along the line one after another — Tokyo Higher Technical School, among others, relocated from Kuramae to Ookayama. In September 1925 Toyo Keizai judged that the line could absorb a fair share of passengers because its speed exceeded that of the government-run Tokaido Main Line and of Keihin Electric Railway, and the following year it recorded that operating results had improved from the second year of business (Shukan Toyo Keizai, 19 September 1925). The post-earthquake drift to the suburbs became the starting point of a long trend that ran on to the post-war Tama Den-en-toshi development.

In 1928 the company merged Den-en-toshi Co., which had been established by Shibusawa Eiichi (渋沢栄一), acquiring the high-end residential district of Den-en-chofu along with the know-how of property development. In 1932 the Toyoko Line (Shibuya–Yokohama–Sakuragicho) was completed end to end and, as the trunk route linking Tokyo and Yokohama, set the earnings base of Tokyu. In 1934 it merged Ikegami Electric Railway, completing a network that tied together Meguro, Shibuya, Kamata and Yokohama. At the start of the 1930s, with the Sakuragicho section still unbuilt, construction costs weighed heavily and there were observations that revenue per share stood at only half that of Keihin or Oji (Diamond, 1 January 1930); once through services to Sakuragicho opened, however, both passengers and revenue rose (Diamond, 10 November 1932). The basic form of the private-railway business model — lay the track, develop housing estates along it, and put a department store at the terminus — was in place by the first half of the 1930s. The decision to make Shibuya Station the terminus became the starting point of a line that runs, some ninety years later, to Shibuya Hikarie, Shibuya Stream and Shibuya Scramble Square.

Wartime consolidation swells the company into Greater Tokyu, and the post-war break-up

In May 1942, under wartime consolidation, the company merged Keihin Electric Railway (today's Keikyu) and Odakyu Electric Railway, changed its trade name to Tokyo Kyuko Electric Railway, and reached capital of ¥204.8 million. In 1944 it merged Keio Electric Tramway as well, and Greater Tokyu emerged — the largest private railway group in Japan, holding Kanto's principal private lines under one roof. In June 1948, after the war, corporate reorganisation restored Keio Teito Electric Railway, Odakyu Electric Railway and Keihin Kyuko Electric Railway to independence, and Greater Tokyu was dismantled after barely six years. Those were six exceptional years in which wartime controls bound together the private railways of the whole Kanto region, but they left behind, for later, a habit of thinking in terms of horizontal expansion in group management. What remained with Tokyu after the break-up was the network of south-western Tokyo built around the Toyoko and Mekama lines and the Shibuya terminus.

Tokyu started again holding the Toyoko and Mekama lines and the Shibuya terminus. In 1948 it established Toyoko Department Store (today's Tokyu Department Store), separating out the retail business, and in 1949 it listed on the Tokyo Stock Exchange. In 1953 it established Tokyu Land Corporation, separating out property sales and the amusement-park business. The break-up of Greater Tokyu shrank the scale of the network, but the core assets — the Shibuya terminus and the Toyoko Line — stayed in hand and became the foundation for the later garden-city development and the redevelopment of Shibuya. A trinity of railways, property and department stores settled in through the reconstruction years as the skeleton of the Tokyu group. The founding of the core companies — Toyoko Department Store in 1948, Tokyu Land in 1953 — was concentrated in the post-war rebuilding period, and it assembled the prototypes of the entities that would later carry the Tama Den-en-toshi development and the Shibuya redevelopment. Whether or not it could keep the Shibuya terminus was, one might say, the watershed that determined the shape of the post-war business.

Thirty years from Goto Keita's blueprint to the completion of the Den-en-toshi Line

In July 1953 Goto Keita chose the Tama Hills as the receptacle for the population flowing into the capital region and submitted a prospectus for the development of the south-west Josai district to the surrounding municipalities. Setting out his grounds for selecting undeveloped land, Goto wrote that if one drew a circle of roughly 40km radius centred on Tokyo Station it took in Chiba, Tsuchiura and Omiya to the east, Kawagoe, Hachioji and Sagamihara-machi to the north-west, and Fujisawa and Yokosuka to the south-west; and that the least developed part of that circle, still forest and open moor just as it was, was the belt running from Futako-Tamagawa along the Atsugi-Oyama highway to the Tsuruma, Zama and Ebina districts (Sangyo to Keizai, September 1953). He then made the scale of the plan explicit, saying that he therefore wished to buy up some four to five million tsubo of land along that highway and build a second Tokyo (Sangyo to Keizai, September 1953). In 1956 the south-west Tama River new city plan was adopted, designating the area within roughly one kilometre of the new line's stations as permitted for urbanisation.

On who should carry the work out, Goto said that Tokyo Kyuko Electric Railway was the most suitable body, though he also thought an independent, separate company would do; either way, he saw no method of drawing Tokyo's population out there other than having a single company buy up those four to five million tsubo, bring in roads, sewers, gas and electricity, provide the other public facilities besides, and sell the ground as finished residential land (Sangyo to Keizai, September 1953) — a judgement that under a land-readjustment cooperative the public facilities would be difficult to build. In August 1956 the Yomiuri Shimbun reported that satellite towns had to be developed in order to hold down the population inflow into the capital region, so the administration's own concerns and Goto's plan pointed in the same direction. The first land readjustment (the Nogawa district of Kawasaki) was begun in 1959, and readjustment work continued for about forty years thereafter, across 55 districts and 3,204 hectares, down to the Inukura district in 2000.

Goto died in 1959, but his successors in management took the plan on, opening the Den-en-toshi Line between Mizonokuchi and Nagatsuta in 1966. Goto Noboru (五島昇), then at the head of the company, said that as things stood every train run piled up losses, running to about $277,778 (¥100m) a month, and that he was perfectly well aware of it; but since it was Tokyu, a private enterprise, doing the work, it could hardly ignore the abacus — if it came off, there was money in the land, money in the houses and money in the trains, an irresistible prospect, though an enormous plan for all that (Jitsugyo no Sekai, December 1966). He was describing a business structure in which the railway alone would run at a loss and the land and the housing would recover it. In later years he still looked back on it as having been driven through on sheer obstinacy (Nihon Keizai Shimbun, 14 March 1989). In 1977 the Shin-Tamagawa Line (Shibuya–Futako-Tamagawa-en) opened, and in 1979 through operation of all trains with the Teito Rapid Transit Authority's Hanzomon Line began. In 1984 the extension to Chuo-Rinkan completed the Den-en-toshi Line end to end, and about thirty years after Goto's blueprint the rail infrastructure stood ready.

The bubble bursts, a ¥42.9bn extraordinary loss, and the retreat from non-core businesses

In a 1986 morning edition of the Nihon Keizai Shimbun, Goto Noboru recalled the starting point of Tama Den-en-toshi: he had had no confidence whatever that a railway could be run profitably on its own, and had thought that if the company first bought two million tsubo of land along the route and developed the area, something might come of it; land-readjustment schemes were still beyond imagining at that stage, and the plan was a broad-brush one (Nihon Keizai Shimbun morning edition, 16 March 1986). Nikkei Business that year noted that the Tokyu group was the product of the Tama Den-en-toshi development, and that the rising population along the line had fed through into a steady increase in passengers (Nikkei Business, 23 June 1986). In 1989 Goto set out the background of the times: the project had drawn attention around the world as a miracle of the twentieth century, and land prices had risen with the Ikeda cabinet's income-doubling plan and the property boom (Nihon Keizai Shimbun, 16 March 1989). It had also been, he said looking back, a high-risk business whose success would have been doubtful without Japan's miracle (Nihon Keizai Shimbun, 16 March 1989).

The weakness of the resort and department-store businesses expanded during the bubble came to the surface, and an extraordinary loss of $456.1M (¥43bn) was booked in the year to March 1995. With the influence of the founding Goto family thinning, Tokyu turned to rebuilding. Under a policy of working through the non-core businesses, shrinking the portfolio that had swollen in the bubble years and concentrating selectively on railways, property and lifestyle services became the basic theme of management in the second half of the 1990s. Development at Tama Den-en-toshi had passed its peak in the 1970s and settled down, and with the Inukura district in 2000 the land-readjustment work reached its close as well. The next question was how to draw value out of the Shibuya terminus and the property on the city-centre side. It was the turning point from the post-war Tama Den-en-toshi model to a model of redeveloping a city-centre terminus, and a period in which a ceiling on earnings growth from the railway business alone came into view and the shift of weight towards property began in earnest.

In 2000 Shibuya Mark City opened and the redevelopment around Shibuya Station began. In 2001 the petroleum retailing business was wound up, and in 2002 Japan Air System — which descended from Toa Domestic Airlines — merged with the Japan Airlines group, taking Tokyu out of aviation. This was the period in which the policy hardened: clear out the non-core businesses and concentrate managerial resources on railways, property and lifestyle services. The basis of the property strategy also settled in the first half of the 2000s — the Shibuya area to be held, other areas to be run as an asset-turnover building business. The organisational and financial footing for liquidating the bubble-era diversification while preparing the redevelopment of the Shibuya terminus was put in place in those same years. Winding up the non-core businesses and concentrating investment on Shibuya became the financial precondition for the projects that followed from Shibuya Hikarie onwards.

Redevelopment land created by relocating the tracks, and Shibuya Hikarie

In 2003 the Den-en-toshi Line began mutual through operation with the Tobu Isesaki Line via the Hanzomon Line, and in 2004 the Toyoko Line began through operation with the Minatomirai Line. At the same time the Toyoko Line's Yokohama–Sakuragicho section ceased operating, switched over to the connection into the Minatomirai district. In 2005 Tokyu Department Store was made a wholly owned subsidiary, a reorganisation of businesses within the group. Under a property strategy of holding the properties in the Shibuya area and running an asset-turnover building business in other areas, the two-tier structure of holding and turnover had settled by the middle of the 2000s. The mutual through-service network of the Toyoko and Den-en-toshi lines spread across the whole capital region, and the means to capture commuting demand along the lines at metropolitan scale was in place. The widening of through services raised Tokyu's standing as the core of a capital-region rail network running across Shibuya, and shaped the preconditions for the redevelopment of the Shibuya terminus that followed.

Shibuya Hikarie was completed in 2012. Built by redeveloping the site of the former Tokyu Bunka Kaikan, it was the first phase of a Shibuya redevelopment tied to putting the Toyoko Line's Shibuya Station underground. On the decision-making over the Shin-Tamagawa Line, Yamato Matsumi (山戸松身) recalled that while the necessity of the line was fully acknowledged, a heavy anguish gripped the company, which could not commit to it lightly given what was at stake for its future (Kotsu Koron, May 1978); he also recorded the grounds on which the through route had been chosen, namely that the Den-en-toshi Line's through path should not run via the old Oimachi Line but take a separate, shortest route (Kotsu Koron, May 1978). When the Toyoko Line's Shibuya Station went underground in March 2013 and mutual through operation began with the Fukutoshin Line, the Tobu Tojo Line and the Seibu lines, the site of the former surface station became fresh land for redevelopment.

In 2018 Shibuya Stream was completed at an investment of about $615.9M (¥68bn), and the Japanese arm of Google, among others, moved into the building raised on the site of the old Toyoko Line surface tracks. In 2019 phase I of Shibuya Scramble Square (the East Tower, investment about $456.8M (¥50bn)) opened. On the delay to the Shin-Tamagawa Line and the form it finally took, Yamato judged that precisely because the period of labour before its birth had been so long, the Shin-Tamagawa Line had come into the world in an ideal form (Kotsu Koron, May 1978), and he touched too on the worry about capacity limits had it been built as an extension of the Ginza Line. The method of converting land freed up by relocating the tracks into office buildings is a feature found in no other private railway, in that it turns rail assets — the stations and the track itself — towards property development. A connected run of redevelopment continued from Shibuya Hikarie through Shibuya Stream to phase I of Shibuya Scramble Square, expanding the floor area around the station and the stock of leasable offices.

Spinning off the railway under a holding company, and recasting group management

In September 2019 the trade name was changed from Tokyo Kyuko Electric Railway to Tokyu Corporation, and in October the railway and tramway business was transferred by corporate split to Tokyu Railways. The Tokyu parent moved to a holding company overseeing the group as a whole across railways, property, lifestyle services and hotels. The aim was to separate the risk and return of the railway business from the parent and to speed up decisions weighted towards capital efficiency, such as property development and M&A. In parallel, the overseas garden-city-style development under way in Binh Duong province in Vietnam (Becamex Tokyu) was also moving, an attempt to carry the domestic model of developing land along a railway abroad. The move to a holding company was an organisational restructuring that recast the structure of a Tokyu built around a railway company, which had held for about a hundred years since the founding of Meguro-Kamata Electric Railway in 1922, in a direction that put property and lifestyle services in the leading role.

In 2013 three companies — Tokyu Land, Tokyu Community and Tokyu Livable — had established Tokyu Fudosan Holdings through a joint share transfer, reorganising the group's property business under a holding-company structure first. Together with the holding-company conversion of the Tokyu parent, this completed an arrangement in which the three domains of railways, property and lifestyle services are each run independently under their own holding company. Through this two-stage holding-company conversion, the Tokyu group adopted a governance structure unusual among capital-region private railways, running the railway business and the property business on separate decision-making lines. The roughly six years from the founding of Tokyu Fudosan Holdings in 2013 to the holding-company conversion of the Tokyu parent in 2019 were the central period in which the group's management structure was recast. That an organisational reform to raise the speed of managerial decisions ran at the same time as the Shibuya redevelopment coming into full swing is the defining feature of the 2010s.