No other city in the British Isles, and very few elsewhere, can match Edinburgh for block-by-block beauty, especially when the fickle and elusive Scottish sun shows its face.

From the medieval charm of Old Town with its narrow closes and cobblestone streets to the stately Georgian edifices of New Town with its broad streets and elegant squares, the Scottish capital’s awe-inspiring architecture is eclipsed only by the city’s stunning natural setting. From the rocky craigs that rise up along its southern and eastern fringes, to the jagged shard of rock on which the castle sits imposingly over Princes Street Gardens, to hills that roll northward down to the Firth of Forth and, beyond that, the North Sea, the terrain leads to surprising and spectacular views around nearly every corner.

As put by Scottish author Alexander McCall Smith: “This is a city of shifting light, of changing skies, of sudden vistas. A city so beautiful, it breaks the heart again and again.”

So impossibly pretty is the city known as the Athens of the North that it is hard to see how today’s town planners could possibly improve on the work of their predecessors centuries ago. Perhaps because of this, combined with Edinburghers’ inherent prudence and caution, the city had been reticent for a long time about dramatic redevelopment schemes – which in any case are complicated by the fact that much of the city centre is a World Heritage site and many of its buildings are listed as historically significant. The room for manoeuvre is not that great: Edinburgh is a compact city and its geography gives it natural borders on most sides.

But, in recent years, says Kenneth Wardrop, interim head of economic development for the City of Edinburgh Council, the successful expansion of the financial services district through a development known as The Exchange “gave confidence that the city could do these kinds of bold projects”.

Development impetus

The strains of a growing population and the need to rethink transport also provided an impetus. Unlike the rest of Scotland, which is suffering a population decline, Edinburgh is attracting an influx of people that will tip its population, currently just over 450,000, over the half-million mark before long – and that’s to say nothing of the five million visitors the city-region receives each year.

Congestion from service vehicles, inadequate city-centre parking and vehicle/pedestrian conflict are top concerns, as well as the related issues of waste management, energy re-usage, and the odd vacant building and unsightly alleyway. “We’re exploring how to get the balance right between cars, buses, pedestrians and eventually trams,” says Jonathan Guthrie, director of the City Centre Development Partnership for the city council. “Access and circulation are important.”

After much debate, the city has arrived at public rail as one solution: a tram link will connect the centre, airport and waterfront by July 2011. (Not all residents are convinced of its merits and the plan has split public opinion.) Mainline rail station Waverly, at the eastern end of Princes Street, is undergoing phased works to increase capacity and there is proposed redevelopment of Haymarket station, at the western end, as well.

To meet the future demand of tourists and residents, the city estimates it needs 4000 additional hotel beds, one million square feet of additional office space, and 600,000 square feet of additional retail space alongside the proposed rationalisation of the existing retail blocks of Princes Street, the main shopping drag and dividing line between Old and New Towns.

Retail plans

Despite its prime city-centre location, the Princes Street retail sector has been underperforming of late, causing Edinburgh to plummet down the CACI ranking of UK retail centres. The ‘String of Pearls’ concept that lies at the heart of Project Edinburgh aims to reinvigorate the area by developing the unique character of each block, rationalising the retail floor plates and providing tenable occupation in the vacant upper stories for, preferably, penthouse apartments and five-star hotels, which would enjoy stellar views of the castle.

An £850m development of hotels, offices and retail outlets at St James Place, where Princes Street meets Leith Walk, is due for completion within the next two years, and it is hoped it will take some heat off crowded Princes Street.

On the waterfront

Just outside the immediate confines of New and Old Towns, the long-ignored, industrial waterfront area from Leith to Granton is being regenerated to provide new housing options beyond the stone tenements and Georgian townhouses of the city centre, and to create housing, business, education and leisure facilities in a more spacious waterside and parkland setting.

An ambitious £7bn development scheme (of which, £1bn will come from the public purse and the rest from private capital) will add up to 30,000 new homes and 350,000 square metres of commercial space on a total area of more than 350 hectares.

Enhancements of the marina in Granton Harbour and a proposed deepwater ocean liner terminal are expected to lure cruise liners and other tourist trade, while nearby Ocean Terminal, where the spectacular Royal Yacht Britannia is permanently docked, will be a magnet for larger scale commercial tourism. A planned museum will highlight the area’s history among these harbingers of the future.

“We want to reclaim the waterfront and make it part of the city centre,” says Mr Guthrie.

The area feels further from the centre than the actual walking distance – the true distance is cultural and psychological. Because of its grubby image and industrial past, the waterfront has not traditionally been a place where well-heeled city-centre dwellers would deign to live or spend an evening, says Keith Anderson, director of the Waterfront Partnership. But some of them are coming around – and if population projections are on target, the search for more space might tempt yet more of them, however reluctantly, away from the uniquely beautiful streets of Old Town and New Town, to an even newer town.