Food store and office block plan on table for Caltongate

The city council is developing its own plans for the land and property it owns on the site in the wake of the collapse of developer Mountgrange.

Under its new vision for the site, an eyesore garage opposite the council's headquarters at East Market Street would be demolished and replaced with a new office and a food store.

Analysts said operators like Tesco and Sainsbury's would be likely to swoop if given the opportunity to open one of their "Express" or "Local" brands so close to the historic Royal Mile, which does not contain any big-name supermarket brands.

A masterplan is currently being drawn up by council officials for the site, and it is also thought that the former North Canongate Infant School on New Street - now known as the Canongate Venture building - could become a publishing, literary and writer's centre.

The council intends to work up plans for the former garage site. Then, if it obtains planning consent, it would look to sell it on to a developer, under the condition that development gets under way quickly.

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Councillor Jim Lowrie, the city's planning leader, said: "It would be a rebuild. It's an old garage opposite Waverley Court and they (council officials) hope to have an office facility and mini market there. It would really liven up that corner. The mini market could be a Sainsbury's Local, a Tesco Express or an M&S - it would be that kind of smaller selection store."

He said that there would be restrictions on what size of office development would be possible on the site, with any new building unlikely to be any taller than the existing garage.

"I would hope that in the next month or two something will begin to take place," said Cllr Lowrie. "The next (planning] committee meeting is in seven weeks, so we will hope to have something before us then. The thinking of our estates people is that if something is under way on the site, it might help attract the other bidders to the rest of the site."

The council had an agreement in principle to sell its assets on the site, which also include a number of flats, to Mountgrange. The London developer fought for four years to get planning consent for its 300 million scheme, which included cafes, restaurants, flats, shops and a five-star hotel.

But the whole development was put on ice before work began when Mountgrange plunged into administration in March last year. And the council withdrew the offer of its assets last month, after growing frustrated at delays to the sale by administrator Deloitte.

Cameron Stott, a director at property agent Jones Lang LaSalle in Edinburgh, said: "With planning and construction time, it won't be complete for at least two years.By 2012/13 office space could decrease and there could be a shortage.

"A food store could also be very successful. There is a captive audience at Waverley Court and it is just round the corner from the station and the Royal Mile, so footfall should be good."