The development of 160 town houses and flats that will occupy the northern portion of the site, is another indication of the improving fortunes of the housing market in the south of England, where house builders are bidding up the price of land in anticipation of rising house prices.
The rest of the site will remain mothballed until tenant demand - which remains weak despite the strength of the property investment market - recovers sufficiently to make a combined retail and office scheme viable.
Spitalfields Holdings, a company jointly owned by two construction companies, Costain and Balfour Beatty, and LET, the property developer, is choosing a joint venture partner from a short list of three housebuilders.
Once the partner is chosen work is expected to be started immediately on the scheme, which is planned to challenge the Barbican's monopoly on prestigious City of London housing.
Despite the fact that Spitalfields is not expected to assume any of the project risk, merely supplying the land, the proposed scheme is likely to put the spotlight on the carrying value of the site in its shareholders' balance sheets. According to Costain's 1992 accounts, the construction company's one-third share of the site is valued at pounds 62.6m, implying a total worth of pounds 188m.
Analysts have repeatedly questioned the valuation of the land, which assumes the completion of 900,000 sq ft of office space and 300,000 sq ft of retail and residential units.
The scheme is scheduled to be developed in phases as market conditions allow with a projected completion date of 2001.
The development marks a change in fortunes for Costain, which has been the hardest pressed of the scheme's investors.
Spitalfields is the last remnant of a diversification in the 1980s that saw it expand into house building and property development but ended in an ignominious rescue rights issue last September supported by only 28 per cent of its shareholders.
The group's fast growth as the market peaked in the late 1980s pushed it into trouble after those markets turned down after the boom.
Stubbornly high borrowings forced it to abandon all but its core operations.
Having pulled out of property in 1991, Costain sold its housebuilding operation last year to Redrow, the builder planning a flotation in the spring, and sold its profitable Australian coal mining business to Hanson.
Last week Peter Costain, chief executive, denied market rumours that the remaining US coal mining operations were to be sold to Hanson.
However, Mr Costain admitted the logic of merging the business with that of Peabody, Hanson's mining subsidiary.
The West End is starting to show signs of a shortage of office accommodation, writes Gail Counsell.
Development availability fell by 30 per cent in 1993 while take-up rose 29 per cent to 4.1 million sq ft, its highest annual total since 1988, according to the surveyors Richard Ellis.
A steadier market has helped to stabilise rent levels and has produced increasing investor interest, with activity at its highest for more than three years and yields falling sharply, they say.
Average top rental values for Mayfair and St James's are now stable at about pounds 40 a square foot while Covent Garden, the Strand, Victoria and Belgravia fell by about pounds 2.50 to around pounds 25 a square foot.
The surveyors agree that tenants are able to obtain rent-free periods and other concessions which reduce the cost, but say that market sentiment by the end of the year was that these were in decline.