The deal for the former Scotmid building at Lochrin Square is the biggest individual letting taken out in Edinburgh since 2003.

More than 600 staff are expected to move into the offices early in the new year as the bank expands its corporate division.

The move has helped make 2007 the busiest for business lettings in the city centre since 1998.

The bank said the deal reaffirmed its commitment to the Capital, where it employs nearly 9000 people, making it the city's fourth-biggest employer. Bank spokesman Mark Elliot said: "This is another piece of the jigsaw of our success story in Edinburgh. Just as The Mound was retained because of its central position, we enjoy people being based in the city centre, as well as at The Gyle and across in Fife."

The premises will be the fifth building housing Bank of Scotland Corporate in Edinburgh.

Mr Elliot said the deal was a sign of the bank's confidence, despite pressures in the financial markets. "You don't take decisions to take on large buildings of this scale lightly," he said. "For us it is business as usual."

In the city centre, more than 750,000 square feet of office space is expected to be leased in the city centre by the end of the year, compared to 475,000 square feet last year.

Graham Birse, deputy chief executive of the Edinburgh Chamber of Commerce, said: "Reports of the decline of financial services in Edinburgh have been greatly exaggerated. The city centre is seeing a reversal of a trend now, where businesses are seeing exactly what it has to offer – be that a bus trail, new tram lines, accessibility to amenities or easy access out to train stations and the airport."

David Robinson, development director of Gladedale Capital, which sealed the Lochrin Square deal, said: "It shows the value of having the right building in the right location.

"Edinburgh is in a fairly stable position and the market has been helped by the growth of big professional firms like lawyers and accountancy firms."

Such has been the vibrancy of the market there are fears there will be no new office space available next year resulting in big increases in prices.

Mr Robinson warned that, with no major office premises due to be completed, a shortage of buildings is likely.

He also added that a tight supply chain will mean the average city centre rent of £28.50 per square foot is likely to substantially increase.

Stewart Taylor, director in charge of business space at CB Richard Ellis, agreed the buoyant market could be held back in the next year by the lack of available space.

Lochrin Square, 92-98 Fountainbridge, The Exchange, Edinburgh