The former Franklin Street bus station in the Adelaide CBD will be redeveloped into apartments including some affordable housing, but construction is not expected to start for at least another three years.
The agreement has been struck between the state government and the Adelaide City Council, which owns the land, and Renewal SA has been chosen to develop the site.
The terms of the deal are confidential, but it will see two mixed-use towers built, 18 storeys and 26 storeys high, capable of housing more than 1,000 people.
Under the plan, 35 per cent of the 392 apartments that will be built will be allocated to affordable housing.
Premier Peter Malinauskas said construction would start once the Market Square upgrade was completed, which is anticipated to finish in 2026.
"The timing of this project is being done deliberately to coincide with the Market Square development adjacent," he said.
"We want the market to continue to function with access to car parking, which this site facilitates while the existing car park at the market is developed."
The development includes 137 affordable studios, one and two-bedroom apartments — 51 built for sale and 86 built for rent.
The entire project is expected to be completed by 2029.
"You don't see parcels of land like this come up very often, so we want to use it for the best interests of the state and at the moment we do have a housing crisis that we think this site can make a contribution towards addressing," Mr Malinauskas said.
"We don't want parcels of land like this in our city to just lay idle as a car park, it should be utilised and developed with a high-quality thoughtful development that brings more people back into our city and delivers all of the construction activity that can come with it."
City of Adelaide Lord Mayor Jane Lomax-Smith said the proposal would help accelerate investment and growth in the city.
"The city has to be part of the solution and not just see urban sprawl going out into the regions," she said.
"There will also be space for retail and hospitality outlets and a mixed-use development, which will no doubt enhance and support the much-loved market district."
Details of the deal are not publicly available and a builder is yet to be chosen for the project.
"It's a confidential arrangement, the contracts haven't been signed yet and we are just finalising matters," Dr Lomax-Smith said.
"There are a few issues that we are just nutting out, obviously the design and the approvals, we will go through the planning process, however we have a plan and we have a pipeline of a development."
Property Council of Australia's SA executive director Bruce Djite said the build-to-rent component of the development would support an increase in supply of rental properties which is desperately needed in Adelaide.
"Build to rent, it's a funny name, but it's as close to a silver bullet as you'll get to addressing the housing crisis," he said.
"It takes time, can't build buildings in a day, but it's great to see."
