[Tiktaalik]

You're right. I'm not sure how I got mislead or misremembered the dynamic here. I thought there was a specific clear tax benefit but doesn't seem so.

There are tax benefits for new buildings for a limited time so maybe that's what I was thinking about and became confused.

[throwaway2037]

Leaving aside your mistake, you raise a great point. Why are there so many empty lots in central Tokyo for sale? It makes no sense financially! Maybe they assume they can tear-down the existing structure and sell it faster than the tax penalty will hit?