A £40m hotel development is being planned in Edinburgh on a site ravaged by fire in 2002.

Located in South Bridge/Cowgate, the site was previously host to the J&R Allan department store – home to the Gilded Balloon comedy venue, Bridge Jazz Bar and La Belle Angele nightclub – which was destroyed by a major blaze that attracted worldwide attention.

The new scheme – called SoCo – is the brainchild of Whiteburn developers, and will feature shops, cafés and restaurants as well as the hotel.

John Shepherd, chief executive of Whiteburn, said: “We appreciate the significant public interest in the site, and have been encouraged by the discussions we’ve had with local councillors, community groups and local businesses over our proposals.

“SoCo will become a destination for people to stay, work and relax within a vastly improved environment, providing jobs and hopefully kick-starting the regeneration of the area.”

Whiteburn had explored a range of options for the SoCo scheme – including housing, a concert hall, cinema and a gallery – but have since ruled them out.

The company is now close to choosing a preferred hotel operator to occupy the upper levels of the 10,000sq m (107,640sq ft) development, which was designed by Edinburgh architect Allan Murray.