The new station will reduce part of the rail yard between the Shinagawa and Tamachi stations and 建設が進められていて and it is planned that Yamanote line Keihintouhoku line trains will stop there.
I have no idea how 建設が進められていて fits into this sentence. I can only translate it as "by means of construction proceeding ..."i.e. the act of construction proceeding is the way that trains will stop at the station. Well, that seems so obvious that it doesn't need to be said. If you don't finish building the station then no trains will be stopping there.
Or maybe the sentence is just saying three separate things strung together into one incoherent sentence. "The station will reduce the rail yard and construction is progressing and trains will stop there".
I feel I must have completely misunderstood/mis-parsed this sentence.
I also feel a bit weird about translating 縮小 as 'reduce'. 'Occupy' or 'replace' would seem like more natural words to use in English. Is there any way I can think of 縮小する to make it seem more natural?
Putting my two concerns together I have a final hypothesis that 車両基地の一部を縮小し and 建設が進められていて go together to give "Construction is proceeding that will reduce part of the railyard and ... If that is so then I didn't know you could join two clauses with the masu-stem form (I don't know the real name for this) where the first clause is the purpose of the second clause.