Nearby residents have objected to the plans on grounds of noise, lack of parking, potential nuisance and a flue too close to neighbouring properties.
But officials are recommending that the scheme for six flats and a 120-seat restaurant at the building in Hamilton Place should be given the go ahead.
The move comes as the Theatres Trust took the venue off its “theatres at risk” register after concluding there was little chance of saving it.
The UK-wide organisation added the Theatre Workshop to the list last year after a rescue bid was launched, but campaigners failed to raise the money they needed to take it over. The theatre, which opened in 1975, was a mainstay of the Fringe for many years.
Theatre Workshop moved out in 2010 after the bulk of its public funding was cut. The B-listed building was put up for sale by the council.
The Save Stockbridge Theatre Building campaign was launched with the backing of veteran Scottish theatre directors Gerry Mulgrew and Andy Arnold, as well as Catherine Lockerbie, former director of the Edinburgh International Book Festival. They warned the city risked a major “artistic asset” being lost forever.
The consortium’s plan was to turn the B-listed building, a former Territorial Army drill hall dating back to 1825, into a multi-arts centre featuring two main venues. But the rescue bid collapsed when they failed to raise the £2 million needed to take it over and renovate it.
The flats and restaurant application is due to be considered by councillors imminently.
Edinburgh North and Leith Labour MP Mark Lazarowicz said he had put in objections to the restaurant development on behalf of residents.
He said: “It is very sad this theatre space, which was well used for a long time, has now been lying empty for some years. It would be good to think it could be brought back for that use rather than being turned into another large catering outlet.”
Mark Price of the Theatres Trust said his organisation had given support and advice to the campaigners trying to save the theatre last year, but had to reprioritise its efforts when the rescue bid fell through.
He said: “We have to concentrate on the theatres most at risk. There seemed not to be a group campaigning for this one any more.”
It’s a gimme shelter plea from Leith venue
LEITH Theatre has been added to the national list of those at risk as the hunt for cash to save the venue goes on.
Plans were announced earlier this year for a £5.9 million revamp of the 1500-capacity venture which has hosted iconic bands such as the Kinks and the Rolling Stones.
The Leith Theatre Trust needs to raise £1m to open the theatre before moving on to a second phase of
The former Odeon
cinema in Clerk Street, which has been under threat of demolition for several years, remains on the “at-risk” register. Hopes of restoring the 1930s venue to its former art deco glory were boosted earlier this year when it was upgraded to an A-listed building.
However, Edinburgh’s former Gateway Theatre in Elm Row has been taken off the “at-risk” list since permission has been granted to demolish it to make way for student flats.