Plans are being drawn up to build a new up-market Oxford shopping arcade opposite Carfax Tower.

The multi-million-pound retail development would be created on a large site behind the city's main Post Office, which would be retained along with other buildings facing on to St Aldate's.

Oxford City Council said the scheme would significantly add to Oxford's appeal as a shopping centre, alongside the £300m redevelopment of the Westgate Centre, due to open in 2011.

There would be pedestrian routes to the new mall from St Aldate's, Queen Street and Pembroke Street.

The council hopes it might be similar to the Golden Cross, the arcade created nearly 20 years ago linking Cornmarket Street and the Covered Market.

The proposals include offices and a student housing scheme.

The site south of Queen Street has a complex pattern of land uses, including yards, offices, minicabs and semi-derelict storage space. A large part of the area is owned by Merton College.

London-based developers Carlyle Skelton have taken a significant area of the site. A spokesman said: "We have acquired a variety of long leasehold and freehold interests from Merton College and other landowners, with a view to creating a significant new retail office and student housing scheme.

"The high-quality scheme will open on to a new pedestrianised square. Oxford suffers from lack of modern retail space, for which there has been no new development for many years.

"The same can be said for student housing and, to a lesser extent, offices."

The city council's chief planning officer, Michael Crofton Briggs, said the developers were now working up their designs and a planning application was expected in early summer.

He said: "We see this as a proposal that would complement the Westgate redevelopment, rather than compete with it. When you look at the big area of land behind St Aldate's, there is not a lot of activity going on."

Existing occupiers include Swarovski, the city council, Blacks Leisure, Henman Solicitors and the Post Office.

City council leader John Goddard said the frontage of the St Aldate's Chambers, currently used as a contact centre, would be retained.

He added: "I am sure this is something that will be welcomed by retailers and shoppers.

"There is a queue of retailers wanting to get into Oxford. At the moment, Oxford is under-shopped, which is one of the reasons the rents are so high."

The creation of a pedestrianised arcade accessed by narrow walkways is certain to refuel calls for the pedestrianisation of Queen Street, which remains clogged with buses.

News of the ambitious St Aldate's scheme comes as a new report revealed retailers saw the city as a prime location in which to do business, and were queuing to snap up properties in Cornmarket Street, Westgate and Queen Street.