An innovative £61m funding agreement will involve City of Edinburgh Council, Scottish Government and developer TIAA Henderson Real Estate.

Called the Regeneration Accelerator Model, the mechanism will enable a combination of public and private sector investment in local infrastructure that can then be offset by business rates and overall gains to the economy.

This will unlock the development, which has outline planning permission for 450,000 sq ft of shopping space over three sweeping crescent-shaped levels and covered walkways.

The development will include a swathe of premium office space, a five star hotel, an apart-hotel, a theatre and 138 flats.

The existing St James Centre will continue to trade until construction work begins next year, running until 2021.

Gardiner & Theobald is cost consultant on the scheme, with Building Design Partnership and Allan Murray Architects involved in design.

New retail, hospitality and construction skills academies will also help provide extra support for those seeking employment such as school leavers.

Deputy First Minister, Nicola Sturgeon said: “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.

“Through schemes such as RAM we are increasing public investment in infrastructure across Scotland, which will create overall gains for the economy as a whole.”

The City of Edinburgh Council has worked closely with TH Real Estate to develop a project that has sustainability at its core.

The plans include a new combined cooling, heat and power centre, electric car charging points, extensive facilities for cyclists, photovoltaic panels, solar tubes and a city car club.

Martin Perry, Director of Development, TH Real Estate, said: “To have secured this funding support is a key milestone for this exciting project, demonstrating confidence in Edinburgh as a leading European city.

“This scale of investment is unprecedented in central Edinburgh and will transform the city’s retail offer, putting it on the international ‘map’of major shopping destinations.”