Property consultants advising Arsenal on its relocation away from Highbury have revealed that a derelict site behind King's Cross station, owned by London & Continental Railways and the National Freight Consortium, is the Double-winning Premiership club's favourite option.
A spokeswoman for Healey & Baker, which last year secretly investigated the north London club's relocation options, said: "Out of all the options, King's Cross is the favourite location for Arsenal's new ground."
A source has also revealed that there is "increasing speculation" that Arsenal has bought from the NFC an option to purchase the land.
A Camden Council spokeswoman also confirmed that conversations between the council and Arsenal were taking place.
But it is unlikely that Arsenal will make a decision on a new site until transport issues are clarified by the election of London's mayor in May 2000. The building of a terminus for the Channel Tunnel high-speed link at St Pancras would make the construction of a football stadium at nearby King's Cross unfeasible.
Officially, Arsenal says that it is looking at all its options and that: "Staying at Highbury remains our top priority." But insiders concede that the club, frustrated at local resistance to expansion in Highbury, has now discounted any possibility of staying at the listed stadium. Its capacity of 38,000 is nearly 20,000 less than its main English rival, Manchester United.
One source said: "It's obvious that staying at Highbury is costing Arsenal money." The club believes that to compete with other top European football clubs, it needs to increase its capacity by at least 12,000 seats. Such a move would generate about pounds 7.5m in extra ticket sales each season. In addition, increasing the leisure facilities could easily double that figure.
Meanwhile, King's Cross residents' groups said that - out of all the plans for King's Cross - the idea of Arsenal basing its new stadium there "is something that we can deal with".
King's Cross has been the victim of planning blight for over 30 years. The inability of local authorities to give the area a clear vision, fuelled by government vacillation over the Channel Tunnel high-speed link, has seen it degenerate into a place which has seen 700 drug-dealers imprisoned since 1992.
Selling the eight-acre Highbury stadium is likely to reap the club at least pounds 20m. One problem the club will face is that its East Stand is listed, but residential developers have indicated that national builders would jump at the chance of buying the ground, which is in an affluent area of north London. Land here would fetch pounds 2.5m per acre.
Roland King, of London residential developer Regalia, said: "You could knock the listed stand down if the club relocated and there was seen to be no practical use for it. It may replicate the stand in the new design for its stadium.
"If the club secured a delisting, it would make the land more valuable. The site's historic content would give it a medium-sized premium."
Arsenal recently floated the possibility of building a ground on Finsbury Park. But a spokesman for Haringey Council said: "The chances of the club getting planning consent for this are extremely remote."
Other options include developing a ground on a greenfield site near to the M25, or at the Millennium Dome site in Greenwich, south-east London. However, a source advising Arsenal said: "We have made no approaches about this, nor have we received any."