WORK is set to start next summer on a £20 million scheme to build nightclubs, bars, restaurants, offices and shops on the fire-hit Cowgate site.
Developers have been invited to submit bids for the major project, which is also expected to include flats above South Bridge, before a planning application is submitted early next year.
The joint-owners of the site today said the project could be completed as early as the summer of 2007.
It marks a major step forward for plans to breathe new life into the landmark plot following the completion of an economic appraisal study to explore development options earlier this year.
City chiefs were adamant in the aftermath of the December 2002 blaze that the site was to be re-developed sooner rather than later.
Award-winning city architect Malcolm Fraser, who designed Dance Base in the Grassmarket, has already delivered early sketches of the proposed scheme to the joint-owners as work progresses on the final design.
Mr Fraser last year unveiled his vision for the fire-hit site, including a central square, "historic" closes and wide steps linking the site to the Cowgate and surrounding streets.
The owners of the site include Raymond Codona, owner of the former Leisureland amusement arcade; Hafid Mahboub, the owner of La Belle Angele nightclub; Forbes Leslie, the owner of the Gilded Balloon building; and Edinburgh University.
A new building, which was expected to be of contemporary design, would be around the same height as its destroyed predecessor and would feature a mixture of traditional stonework and glass to let light into the site.
A spokesman for the joint-owners today said: "The owners of the site on Cowgate and South Bridge which was severely damaged by a fire in December 2002 and subsequently demolished have combined their interests and are now to seek a development partner to assist in the redevelopment of this important and historical site.
"Once a development partner is selected, a planning application will be lodged with a view to starting on-site in the summer of 2005 and a hoped-for completion in the summer of 2007.
"At present, the development proposals include reinstating many of the previous uses, including nightclubs, bars, restaurants, retail and offices.
"The upper-floor accommodation above South Bridge will be the subject of a detailed discussion with the chosen developer. The development project construction value is likely to be in the order of 20m."
Edinburgh City Council leader Donald Anderson today welcomed the progress on re-developing the site.
He added: "I am delighted to hear this and it is fantastic news for the city."
Last year, comedy club promoter Karen Koren revealed she had given up hope of her Gilded Balloon empire returning to the site of the Cowgate fire and claimed she had been "frozen out" of plans for the site’s future.
The Fringe impresario said she had abandoned plans for a return "home" for her well-known comedy club.
She said she was resigned to losing out because she had no legal rights to return to the Cowgate as she was only renting the Gilded Balloons landmark building. But she was "devastated" she was being given no role in discussing the future of the fire-hit site.
More than 150 fire appliances from across central Scotland helped tackle the flames for a period of 52 hours, until the fire was extinguished shortly before midnight on December 9, 2002.
Firefighters from across the Lothians, Fife and Strathclyde regions clocked up 700 "shifts" fighting the blaze, which destroyed 12 properties in the heart of the Old Town. The fire has been blamed on a faulty fuse box.
On December 7, at about 8pm, eight fire appliances were mobilised after a fire alarm went off at Edinburgh University premises on South Bridge. The second call came from nightclub La Belle Angele, at Hasties Close, two minutes later.
Fire chiefs then received a third call at 8.15pm from the manager of Leisureland at South Bridge.
The firefighters first on the scene found a blaze on the first-floor area of the Living Room pub, which spread quickly through the multi-storey buildings dating back to the 17th century.