What Is a Small Concession? A Complete Guide for Local Government Officials [2026 Edition]

A Small Concession is an initiative in which local governments leverage private-sector ingenuity to undertake small-scale PPP/PFI projects involving idle public real estate that they own or have acquired.

In practice, this means activating so-called "idle public real estate" — closed schools, traditional townhouses donated by residents, and deteriorating public facilities — by having private businesses handle planning, development, and operations, thereby simultaneously addressing local challenges and enhancing the value of the surrounding area.

The key distinction from conventional concession arrangements (which target large-scale infrastructure such as airports and water systems) lies in scale. A Small Concession is designed as a "small-scale public-private partnership" with a total project cost of under 1 billion yen, structured to allow entry by actors other than major corporations.

This framework was formally launched when MLIT established the Small Concession Platform in December 2024. As a relatively new institutional framework with limited competing sources of information, it is all the more important to develop an accurate understanding now.

The institutionalization of Small Concessions reflects two structural problems facing Japan's public facilities.

The Growing Stock of Idle Facilities

Japan sees approximately 450 school closures per year, with a cumulative total of 8,850 closures from fiscal year 2004 through fiscal year 2023. Of the 7,612 buildings still standing, 5,661 (74.4%) are in use, while 1,951 remain unused — of which 1,503 have no designated future purpose.

But the problem extends well beyond closed schools. As Japan's population declines, public facilities and public real estate that have lost their purpose — community centers, meeting halls, former government offices, former clinics, and former housing — exist in vast numbers across the country. These are increasingly becoming "negative assets" that generate nothing but ongoing maintenance costs.

The Limits of Conventional Approaches

Conventional large-scale PPP/PFI methods are poorly suited to activating such small-scale facilities. Applying complex procedures under the PFI Act — or commissioning advisory services from major consultants at a cost of tens of millions of yen — to projects with total budgets of only a few hundred million yen is simply not cost-effective.

At the same time, the designated manager system typically involves designation periods of only three to five years, which makes long-term investment recovery difficult for private businesses. If a company invests tens of millions of yen in renovations but faces the possibility of losing its designation three years later, no one will make that investment.

Small Concessions were designed to fill precisely this gap — too small for large-scale PPP/PFI, but too substantial to be handled adequately by the designated manager system alone.

Types of Eligible Facilities

MLIT's promotion framework envisions the following categories of facilities:

• Closed schools and former school sites: Conversion into welfare facilities, free schools, co-working spaces, community hubs, and similar uses
• Traditional townhouses and former residences: Revitalization as tourist attractions, accommodation facilities, and restaurants
• Idle public facilities: Private activation of former government offices, former clinics, and former lodging facilities
• Sports and cultural facilities: Repurposing as training centers, experiential facilities, and similar uses

Importantly, the focus is on adaptive reuse of existing buildings. Rather than new construction, the approach involves renovating existing structures and bringing them back into use — enabling projects that keep initial investment low while capitalizing on the building's history and the local context.

Project Method Options

A Small Concession is not a single method established under a specific law. Instead, it is designed as a menu of methods, allowing the most appropriate approach to be selected based on the characteristics of the project.

The choice of method depends on the facility's condition, revenue potential, and the municipality's policy direction. Designing this "method selection" process is one of the most important decisions in the commercialization of a Small Concession project.

MLIT's promotion framework identifies three structural challenges that impede the spread of Small Concessions.

1イメージの壁

PPP/PFIの進め方がわからない

→ セミナー・先進事例の共有

2パートナーの壁

運営する民間事業者が見つからない

→ 官民マッチング・サウンディング

3事業化の壁

手続きが煩雑・事業性が不透明

→ 専門家派遣・伴走支援

Barrier 1: The Image Barrier

The term "PPP/PFI" is associated in many people's minds with large-scale projects, and awareness that it can also be applied to small-scale facility activation has not widely taken hold within local governments. In many cases, mayors and municipal councils fail to grasp its relevance to smaller initiatives.

Barrier 2: The Partner Barrier

For small-scale facilities in rural areas, the greatest obstacle is often the inability to find private businesses willing to take on operations. In major metropolitan areas, multiple operators may express interest, but in towns with populations of tens of thousands, it is not uncommon for a market sounding to yield zero responses.

Barrier 3: The Commercialization Barrier

Even when a prospective operator is found, the procedures under the PFI Act are complex and burdensome — often too heavy a lift for one or two staff members at a small municipality. In many cases, there is also a lack of in-house expertise for assessing project viability (financial projections) and securing financing.

To overcome these barriers, the national government is putting in place a platform and expert dispatch program, as described below.

Small Concession projects proceed through the following five phases.

💡

機運醸成

PPP/PFIの理解促進 首長・議会への説明

→

🏢

施設選定

遊休施設の棚卸し エリアビジョン策定

→

🤝

事業化検討

サウンディング実施 官民対話

→

📊

事業計画

収支シミュレーション 導入可能性調査

→

📋

公募・選定

募集要項策定 事業者選定

Phase 1: Momentum Building

This phase focuses on deepening internal understanding of PPP/PFI within the municipality. Activities include briefings for the mayor, council, and relevant departments; visits to pioneering examples; and participation in seminars. Skipping this phase and jumping straight to a public solicitation frequently leads to projects stalling due to lack of internal consensus.

Phase 2: Facility Selection

This phase involves taking stock of idle facilities and narrowing down candidates for Small Concession projects. Rather than simply selecting "facilities that happen to be vacant," it is important to make selections in light of the surrounding area vision and local community needs.

Phase 3: Feasibility Study

This phase involves conducting a market sounding to understand the intentions and ideas of private businesses. By confirming at this stage whether private actors actually want to enter the market, municipalities can avoid the situation where a public solicitation receives zero applicants.

Phase 4: Business Planning

This phase involves conducting financial projections, feasibility studies, and business structure design. It requires concrete calculations of renovation costs, operating costs, and projected revenues to verify whether the project is commercially viable.

Phase 5: Solicitation and Selection

This phase involves drafting solicitation documents, designing evaluation criteria, and selecting an operator. Evaluation criteria should be designed with a scoring structure that assesses not only price, but also the quality of the business plan, contribution to the local community, and operational capacity.

In December 2024, MLIT established the Small Concession Platform. This is a mechanism that brings together diverse stakeholders from the private sector, government, academia, and finance to support information sharing, matchmaking, and project formation.

Member Composition (as of May 2025)

The platform had reached 1,042 registered members as of May 2025.

With roughly equal numbers of local governments and private businesses, the platform is beginning to function as a venue for official-private dialogue. Registration is free, and is open to local governments, private businesses, and individuals alike.

Expert Dispatch Program

One of the platform's most important functions is the dispatch of experts through the Small Concession Formation and Promotion Program. Under this program, the national government dispatches selected experts to municipalities that are actively exploring Small Concessions, providing hands-on support throughout the process.

In fiscal year 2026, seven municipalities are designated as recipients, with experts supporting the early stages of commercialization — from area vision development to facility condition surveys.

While the institutional framework for Small Concessions continues to mature, actual commercialization requires business design tailored to each municipality and facility. Simply copying a successful example from another municipality will not produce the same results if the underlying conditions — population size, location, appetite from private businesses, and so on — are different.

As a starting point, consider taking the following steps:

1. Take stock of idle facilities: Determine how many candidate facilities exist within your municipality.
2. Join the platform: Register as a member (free) to access the latest information and case studies.
3. Consider conducting a market sounding: Gauge private-sector interest early in the process.

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There is much to learn from case studies, but the same results are not guaranteed in your own community. Clarifying underlying conditions, selecting the right method, and designing the right project structure — these are tasks that cannot be completed simply by reading case studies.

ISVD offers free consultations to help municipalities clarify their specific circumstances and jointly design the most appropriate approach to public-private partnership.

References

Small Concession Promotion Strategy (2024)

Small Concession Platform (2024)

Minna no Haiko Project (Everyone's Closed School Project) (2024)

PPP/PFI Promotion Action Plan (2024)

Park-PFI (Public Solicitation for Park Facility Installation and Management System) (2024)