IT regularly tops the polls of the city's ugliest buildings. But Argyle House – the grey concrete office block on Lady Lawson Street – finally looks set to be knocked down.

The council is to begin drawing up new plans for the site, which is likely to become one of the most sought after development opportunities in the Capital.

The 60s building – home to various Government departments, including the Department of Work and Pensions and the Traffic Commissioner – is regularly held up as a bad-design classic.

The council today remained tight-lipped about the proposals, which were supposed to remain confidential.

But a report accidentally posted on the council's website reveals the site could be redeveloped with a shops, offices and homes.

The area around Lady Lawson Street, West Port, King's Stables Road and Castle Terrace would also be improved, with landscaping and better pedestrian links.

Cameron Stott, director of property consultants Jones Lang LaSalle Edinburgh, said: "The Argyle House and adjoining site represents a cracking development opportunity right underneath Edinburgh Castle.

"It is a challenging site, however, and the building is one of Edinburgh's eyesores – so the sooner it goes the better. I congratulate the council and the building's owners for seizing the initiative.

"Any additional office space will help address a forecast major shortage in Edinburgh.

"There is a massive opportunity for a mixed-use development featuring offices and a quality hotel. There is a major demand for extra hotel beds in the Capital and I know of a number of operators either considering establishing a hotel in Edinburgh or expanding their presence."

The West Port area – home to many of Edinburgh's lap-dancing bars – is already undergoing major redevelopment.

The former post office building has been demolished by owner The Kenmore Property Group, to make way for a new £20 million office development.

Mr Stott said: "This quarter has been boosted in recent years by the likes of (Edinburgh College of Art's) Evolution House and the forthcoming Westport 102 office development by Kenmore Property Group."

The report for January's city centre neighbourhood partnership has now been removed from the council's website.

In it, Jenni Brown, the council's city centre neighbourhood manager, said: "The council is in discussion with the owners of Argyle House (Fordgate Property Ltd) to explore the possibility of a joint development of its site and the adjoining council-owned site at King's Stables Road.

"At this stage there are no firm proposals or mix of uses identified, but clearly there is an opportunity to create a development that consists of a variety of uses."

A council spokeswoman added: "This application will be considered by the neighbourhood partnership at the end of January."

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