COUNCIL chiefs are hunting a new developer to transform the former Tyrrell & Green building in Southampton after conceding £50m redevelopment plans have collapsed.

The city council hopes a new developer can pick-up the pieces of the flagship scheme after the luxury flat builder lined up by the council went into administration and lost financial backing.

City Lofts had planned to demolish the derelict department store to make way for 282 flats in landmark glass towers up to 18 storeys high, housing a £13.7m arts complex on the lower floors.

The proposed arts complex was central to the council's bid to create a cultural quarter in the city, including a revamp of Guildhall Square, and make Southampton the arts capital of the south.

But City Lofts became one of the latest high profile casualties of Britain's housing collapse which has seen thousands of job losses and the value of shares in building firms tumble.

The downturn has already hit other high profile developments.

Wilson Bowden, part of home giant Barratt after a £2.2billion takeover last year, has pulled the plug on work at Admiral's Quay in Ocean Village with just three of five proposed apartment blocks built, and most of the shops bars and restaurants are yet to be completed. The plot is now up for sale and the company is axing 45 jobs locally as part of 1,200 nationally.

Councillor Royston Smith said: "Although this is clearly a setback with our immediate plans for the development of a cultural quarter, Southampton City Council will be seeking a new development partner to take the scheme forward and remains committed to the regeneration of the Northern Above Bar area."

Cllr Smith said he was "optimistic" of finding a new developer for what he described as "the premier site in Southampton."

But the council now faces at least a six-month delay to the project which is already four years behind schedule after a previous developer Raven walked away when it hit financial difficulties.

Cllr Smith said City Lofts was vulnerable because the firm relied heavily on funding from the banks.

He said: "We are not going to dumb down this site and turn it into something that is average."

The council had earmarked £3.3m from the sale of the former Tyrrell & Green plot to help fund the arts complex but according to property experts is now likely to get less than the £7.25m it agreed with City Lofts last April.