Building work began this week after developers TH Real Estate sold a 75 per cent stake in the 1.7 million sq ft retail and leisure centre to Dutch pension asset manager APG. TH Real Estate will hold the remaining 25 per cent stake.

The plan to demolish the existing 1970s St James Centre and replace it with modern retail and office space was originally given the go-ahead in 2009.

The project met with a series of delays, with developers blaming difficulties in attracting international investors in the wake of the financial crash in 2008 and “uncertainty” surrounding this year’s EU referendum vote.

Doubts over the project were also raised following a legal challenge over ownership of the site.

Once complete, Edinburgh St James will comprise 850,000 sq ft of retail space, anchored by John Lewis, a multi-screen cinema, a W Hotel comprising 214 rooms and 150 private apartments.

Designed by Allan Murray Architects, the development will also create up to 3,000 permanent jobs.

Laing O’Rourke, which had been appointed on a consultancy basis to advise on pre-construction works over the last year, has now been appointed as the main contractor for the project.

Demolition work is anticipated to take around 18 months, with the retail and leisure element being finished in 2020, followed by full scheme completion in 2021.

Myles White, director of retail, TH Real Estate, said: “We are delighted to be strengthening our existing relationship with APG, with whom we have built up a strong and successful relationship over the past eight years, to partner on this exceptional development. Both APG, and ourselves, on behalf of our UK Shopping Centre Fund investors, look forward to a long term partnership on this investment which we believe will set a new benchmark for the future of retail and leisure schemes, both in the UK, and beyond.”

Robert-Jan Foortse, head of European property investments at APG, said: “The Edinburgh St James project is one the UK’s largest and most significant regeneration projects. We are excited to become part of this scheme that will transform and reinforce the heart of Edinburgh city centre with the creation of a new shopping destination. Furthermore we believe that the addition of the W hotel will help attract even more tourists to this Unesco World Heritage city. As such, the project fits very well in our portfolio with stakes in shopping centres like Westfield Stratford City in London and CAP3000 in Nice. Edinburgh St James also fits in seamlessly with our strategy to increase our focus on ‘develop to core’ projects. In TH Real Estate we have a long time trusted partner and we look forward to working with them in the completion of the project and its management, once it has been completed.”

Cabinet secretary for economy, jobs and fair work, Keith Brown added: “The Scottish Government warmly welcomes this major investment in Edinburgh and Scotland, which will have significant positive impact on construction activity, jobs, and the economy. I am particularly pleased that the Scottish Government has been able to help unlock the investment by working in partnership with the Scottish Futures Trust and Edinburgh City Council on the Growth Accelerator Model through which we will be contributing significant sums and assisting the council to manage risk.

“I also welcome the plans for a training academy to help ensure the positive impact of the investment on jobs and training is spread as widely as possible. This is a major signal of investor confidence in Scotland, and provides further demonstration that Scotland is open for business.”