The arches under Jeffrey Street, which date back to 1875, will be turned into shops by South African firm Artisan Real Estate as part of the revamp of the Caltongate gap site, which was rebranded “New Waverley” last year.

Edinburgh-based Staran Architects have been appointed to deliver the project, with Eric Young & Co and Culverwell acting for Artisan in the leasing of the arches.

The developer said it planned to create a “leisure-based environment” at the site, which would include bars, restaurants and retailers.

Clive Wilding, the project director, said: “This is a wonderful opportunity to create a completely new kind of retail and leisure experience, right in the heart of Edinburgh’s Old Town.

“The arches were traditionally used for storage areas and have never been accessible to the public – so it’s an amazing opportunity to open up an historic part of the city that has never been seen before.”

He added: “The arches will bring an interesting and vibrant new dimension to our New Waverley development, which is now progressing on all fronts.

“We are now speaking to a wide range of potential occupiers but want to see them converted into bars, cafes, restaurants and independent niche retailers – as well as providing distinctive venues for arts events and food markets.

“This will bring tremendous energy to the area, linking closely to both the Royal Mile and the new public square which lies at the heart of the development.”

The developer said 15 of the 19 arches were tall enough for public use. The largest arch will be designed over three levels, and will be topped with a rooftop terrace.

Work on the arches will start in the summer, with the project targeted for completion before Christmas, Artisan said.

The project is part of the bigger New Waverley scheme which grew out of the failed Caltongate development.

The new development is set to include a 146-apartment Adagio Aparthotel facing on to the Royal Mile. There will also be a new £6.5m public square linked to the Aparthotel, creating what developers have called “a vibrant central hub” for the new development of office space and new retail businesses.

Construction work on the initial development phase of two Whitbread hotels with frontages on to East Market Street and Cranston Street is also progressing.

Work on the two hotels – a 127-room Premier Inn and a 121-room Hub by Premier Inn – began in November 2014 with a completion date set for autumn 2016.