Land Securities has been sent back to the drawing board after Deputy Prime Minister John Prescott refused planning permission for its 250,000 sq ft (23,230 sq m) Coppergate Riverside development in York.
Plans for a second phase at Coppergate have been in gestation for more than a decade, and the proposal was the subject of a lengthy public inquiry last year.
Prominent among the objectors was the Commission for Architecture & the Built Environment, the Government's architectural watchdog. The main concerns of the inquiry were the siting of the development in relation to the historic Clifford's Tower and the Eye of York; the sensitivity of the scheme to the historic area; and the quality of the architecture.
Land Securities chief executive of development Francis Salway vowed to persevere with the scheme. 'We are disappointed with the decision, but believe that the case for further retail space in York has been proven,' he said.
'We believe we now have an opportunity to reflect on the inspector's conclusions and work closely with York City Council, English Heritage, the local community and others to develop a process to allow us to move forward from here.'
Salway pointed out that Land Securities had overcome similar planning setbacks in Exeter, giving it hope that it could successfully revise its York proposals. And he noted: 'While this is a setback for us, our present holdings in the site provide a high income yield and our overall investment in the scheme to date is small.'