Work began on Monday on a four-year building programme to redevelop the Shell Centre on the South Bank.
The development – named Southbank Place – is a joint venture by Canary Wharf Group and Qatari Diar.
Shell will remain in the main 28-storey tower but the rest of the site bounded by York Road, Chicheley Street, Belvedere Road and the railway line will be cleared to make way for two new office blocks and five residential buildings with around 800 homes.
The first set of new buildings will be complete in three years' time but it will take until autumn 2019 for the whole scheme to be finished.
Work began on Monday with the installation of a new fence around the site. The disused footbridge across Upper Ground is due to be demolished next month.
"In the long run there should be significant benefits from the project, (in terms of business rates and council tax), but for the projected three years of construction the site will go out of rating and there will be a significant impact on the business rates take and therefore on the revenue budget," said officers in a report prepared for next week's cabinet meeting.
John Pagano, managing director of development and construction at Canary Wharf Group, said: "It will provide much needed London homes, including affordable housing, and a material boost to the local economy in the form of jobs and our carefully targeted procurement processes.
"The mixed use development will also include new offices and shops and restaurants for residents, the local workforce and visitors, regenerating a currently tired part of the South Bank."
Local resident George Turner lost his bid to challenge the development in the High Court earlier this year.
For the latest local news and events direct to your inbox every Monday, you need our weekly email newsletter SE1 Direct.
7,000+ locals read it every week. Can you afford to miss out?
Read the latest issue before signing up