The new St James Quarter development includes outline planning permission for premium shops, a five-star hotel, a four-star hotel, an apartment hotel, a cinema-theatre, restaurants, 138 flats and offices.
The centrepiece is a circular hotel. The top three storeys, complete with glass-topped rooftop restaurant, will be visible on the skyline from many parts of the city.
Work is due to begin next year on the project, which is forecast to support around 2,300 permanent jobs and generate £25m for the Scottish economy annually.
John Lewis department store will remain open, but the remainder of the St James Centre, regarded by many residents as one of the city’s ugliest buildings, will be demolished.
New retail, hospitality and construction skills academies will be set up, hosting approximately 1,000 placements each year.
Edinburgh City Council leader Andrew Burns described the unveiling of the new plans yesterday as a “red letter day for Edinburgh”.
He said: “There is no doubt that in almost every economic arena Edinburgh punches above its weight but the one area where it could do better is in its retail offer.
“I’m entirely confident that this St James Quarter will draw us up to comparable status with our major competitors.”
Earlier plans announced in 2009 by TIAA Henderson Real Estate, the company which owns the site, stalled because of the last recession.
The enterprise is being funded by a new form of public private partnership known as a regeneration accelerator model (Ram) between the Scottish Government and TIAA Henderson.
More than £60m will be invested by the taxpayer under the deal, which is similar to the one used to develop Glasgow’s Buchanan Galleries.
The government expects to claw back around £270m over 25 years from enhanced business rates as a result of the project.
Martin Perry, director of development for TIAA Henderson Real Estate, said the plans were now “100 per cent” certain to go ahead.
“We have worked very closely with the City of Edinburgh Council and the Scottish Government to realise this vision and we appreciate their support and assistance. This scale of investment is unprecedented in central Edinburgh and will transform the city’s retail offer, putting it on the international map of shopping destinations.”
Deputy First Minister Nicola Sturgeon said the project would “transform this area of the capital, creating thousands of jobs and boosting the economy”.
She said: “This has only been possible due to an innovative funding model.
“This government is determined to invest in Scotland’s infrastructure – both to stimulate growth in the short term and lay the foundations for long-term success.”
Graham Birse, director of the Edinburgh Institute business school at Napier University, described the new funding model as “game changing”.
He said: “It’s been difficult in the past to find a way of implementing this business model because of Treasury and local government funding rules. It has required the Scottish Government to adopt a different position from its historical approach. It is game-changing because it is triggering a development which would otherwise have taken a long time to come to fruition.”
Neil Baxter, secretary of the Royal Incorporation of Architects in Scotland, said the quarter would provide an opportunity for architects to reflect the changing nature of the city. “The skyline should not be considered sacrosanct. As quality is ensured, we should not be fearful of something adventurous.”