'Just look around. There's nobody here," says Gregory Henriquez. The B.C. architect and I are standing next to Honest Ed's on a rainy Saturday morning, and he is right. On this prime piece of downtown Toronto, the only figures are us and a few people he has come to meet – led by Ian Gillespie, the developer whose company will soon be rebuilding a 1.8-hectare site.

They are here together, for the first time, to establish a vision. Mr. Gillespie has a question: Why, in this prime spot in downtown Toronto, is there so little activity on the street? "We're going to do something about that," Mr. Gillespie says softly.

They certainly will, and their project will be one of the biggest – and one of the most visible – in Toronto's recent history.

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Mr. Gillespie's company, Westbank Projects Corp., is signalling its approach by tapping Mr. Henriquez for the job. (An official announcement will come later this month, after he is officially registered as an architect in Ontario.)

A talented designer, Mr. Henriquez has a strong commitment to social justice. He and Westbank have collaborated, in Vancouver's complex planning environment, on buildings with blends of market-rate and affordable housing, retail, and cultural institutions. "I bring something of a left-leaning social activist component as well as a design component," Mr. Henriquez says. "It starts to temper the economics, and it becomes something really special."

Now, perhaps, Toronto will get a large-scale introduction to that Vancouver model. Mr. Gillespie, who has already built in Toronto with the well-designed Shangri-La hotel and residences, prides himself on high standards for sustainability and design. He is now working on iconic high-rises in Calgary and Vancouver with the hotshot architect Bjarke Ingels. But Mr. Henriquez does not make icons. The goal in Toronto is nuanced mixed-use urbanism. "Our success here," he says, "will be in the question: Did we move the bar?"

They will need to. It has been almost 20 years since the current wave of urban intensification began in Toronto, and condos are not going away; the demand to live in vibrant, pedestrian-friendly districts is only growing. Toronto needs new development that offers not just homes, but shopping and services, for a growing class of urbanites. Most local developers have not bothered to do this; it is simpler to sell a pile of small apartments, build a few storefronts where the city demands it, and move on.

The Ed's site heralds a new generation of large, complex mixed-use developments. Accumulated by the Mirvish family over decades, it includes the store – a beloved landmark that is, once you look past the hand-painted signs, a homely mess. More interesting is Mirvish Village next door, a block of houses leased out as restaurants, retail and artists' studios. Mr. Gillespie muses about making this stretch of Markham Street a pedestrian-only zone. "That's what makes the project so interesting," the developer says. "It's more than just one building. It has to be."

Westbank has conducted a year-long consultation with neighbourhood and business groups. Paul MacLean, chair of the Palmerston Area Residents Association, leads a coalition of these groups; he is cautiously optimistic about the development, and he describes the process as "a soft sell, not the usual process of trying to wow people with renderings."

That is in contrast to another development proposal that made news recently: David Mirvish's plan for three towers of 80-plus storeys on King Street West that would be partly funded by the sale of Honest Ed's. Mr. Mirvish hired Frank Gehry and launched the project with a PR juggernaut; it was exciting but flawed, and the city eventually haggled it into a more suitable shape after a year of public acrimony.

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The argument at Bloor and Bathurst streets is about size, but also about what form the development should take. Public consultations will help shape it. "That is something we do in Vancouver as a matter of course," Mr. Henriquez says. "It allows people to feel part of the process and inspire us to do meaningful things."

Woodward's provides a precedent. The department store, dating to 1903, became a vacant hulk amid the poverty and crime of the Downtown Eastside, and its redevelopment was deeply controversial. Mr. Henriquez and Mr. Gillespie partnered with the city and community groups and assembled a complex package. The project mixes luxury condos, housing for the very poor, retail, a cultural centre, government offices, and a Stan Douglas photo-mural that depicts the 1971 Gastown riots. In architectural terms, it is a quiet success; as city-building it is exceptionally creative.

Looking at the Honest Ed's site, Mr. Henriquez sees similarities. He adds: "In the community, there are the same common values about their desire for rental housing and affordability – I feel kind of at home here."

Mike Layton, the city councillor who represents the area west of Bathurst, says Westbank's consultation with neighbourhood groups – including my own – has brought up clear concerns, including a desire for smaller-scale retail, open space and some preservation of Mirvish Village. He also cites the temporary use of the store's parking lots by the Fringe Festival and The Stop Night Market as "an interesting jumping-off point."

So far, Mr. Gillespie and his company have not finalized their plans. They are considering rental housing as well as condos, and Mr. Gillespie has met with University of Toronto president Meric Gertler to discuss a campus presence here.

Mr. Gillespie, walking down Markham Street, riffs on other ideas they have shared: a cluster of destination restaurants; breaking up the block with pedestrian connections; moving retail space both above and below ground. And a grocery store. "Or," he asks, "is it a public market, a space that we curate ourselves? That's obviously a lot riskier. On the other hand, there's something interesting about that idea."

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That is a sentence I can't imagine hearing from the people in charge of Toronto's largest development companies. The questions are interesting. The answers will be more so.