The city council today confirmed that the former economic development offices at Advocates' Close, off the Royal Mile, are under offer to a developer that wants to turn them into a massive new hotel.
The huge building, which extends down to Cockburn Street, contains 110,000 square feet of space, making it about half the size of the giant Waverley Gate office on Waterloo Place.
And a separate site at Market Street, which used to be a transport office and has planning consent to be flattened and turned into a 90-bed hotel, has also been put on the market. The sites are seen as opportunities to create a "cluster" of hotels close to Waverley Station.
The sell-off of the two Old Town properties is expected to raise much-needed cash for council coffers as it faces having to make more than 90 million of savings over the next three years.
City leaders said the development of a hotel on Advocates' Close would be in keeping with other leisure uses in the area.
The site is under offer to a development company. It is thought that it would then need to attract a hotel brand to occupy the site.
The former transport office at 6-8 Market Street, which includes a car park between the City Art Centre and the building itself, already has planning consent that would allow it to be demolished and replaced with a new 90-bedroom hotel.
A previous plan for the building was to turn it into a new arts venue as part of a creative "hub" that would also include the Fruitmarket Gallery and City Art Centre. But the council is now looking to sell it on - although it is understood it may consider a joint venture if the arts venue option interests any bidders.
Councillor Buchanan, the city's economic development leader, said: "We are looking at a range of financial options with our asset-backed vehicles. We have to look at all options."
However, property experts said it may be difficult to achieve a good price in the current climate.
Charles Guest, a partner at property firm Ryden, said: "They are selling these properties somewhere near the bottom of the market, so that will impact price."
Eight firms vie for chance to 70s develop office block
Eight hotel operators have lodged bids to redevelop a "brutal" 1970s office block into a 157-bed hotel.
Haymarket House, the former government social security office, will be transformed into a modern hotel after proposals were given the go-ahead by city planners.
Commercial property agents Jones Lang LaSalle said the bids would be examined over the coming weeks, with a single hotel operator then being selected to develop the sought-after site.
Peter Darroch, director of Jones Lang LaSalle Hotels, said: "The general feedback from the operators is that this is a very good site and that this is somewhere that can become a thriving business.
"The site is in an excellent central location and the plans to refurbish the facade of this office block will revitalise its image."