Owner scraps plans for St Andrew Square site in effort to lure hotel

Australian developer Stockland planned to transform the appearance of the south side of the famous square.

But the slump in the office market has led to the scheme, which includes the former headquarters of Scottish Provident, falling nearly three years behind schedule. And now the company has confirmed that it is looking to scrap the office elements of its proposals, with a series of five-star hotel operators expressing an interest in the site.

Among the top operators said to currently be eyeing moves to the Capital are Hilton, Jumeirah, Intercontinental Hotel Group and Hyatt.

But any change to hotel use on the site will mean Stockland will have to go back to the drawing board and resubmit a new planning application – which could leave the site lying empty for many more months.

Ken Lindsay, managing director of Stockland, said: "We are exploring alternatives because we want to see it developed and the office market is currently in the doldrums, for obvious reasons.

It would be a first class hotel site given its wonderful location and prominence."

The original scheme was to include 92,000 square feet of office space

and it was also to feature around eight two- or three-storey shops.

Mr Lindsay said that if a hotel occupier pre-lets part of the development, it could free up funding to allow the retail element to go ahead.

"Clearly a pre-let is vital to allow development to go ahead," he said. "It would be extremely positive news to allow us to get development started. Interest (from hoteliers] is very much at the top-end but it is at too early a stage to have any names."

Charles Guest, director of Ryden, said: "There is an opportunity with the weaker office market for hotels to get into the city centre and this would be an A1 location for a prestige five-star hotel. It is bang in the middle of the city centre, within the transport system that will include trams, with a good outlook on to St Andrew Square."

The site was bought by Stockland in 2008 for 21.75m from ING, which was supposed to start work itself in 2007. Stockland said at the time it would complete the scheme by the end of 2010.

Stewart Taylor, a director at property firm CB Richard Ellis, said: "That building was bought at the top of the market. They wanted to create offices but that would be very difficult in this market, whereas there is still demand for prime hotel sites."

Cameron Stott, a director at Jones Lang LaSalle, said: "The office market is pretty weak but there are still some hotel occupiers that are active and Edinburgh is sought after by some hotel companies."