Developers Perth City Market Trust (PCMT) had applied for planning permission to transform the building after Historic Scotland blocked a plan by Perth and Kinross Council to tear it down and replace it with a new £4 million civic square.
But commercial property experts Jones Lang Lasalle, examining the PCMT bid, have ruled it is not financially sound. Councillors to will now meet to consider the verdict on the bid, which was supported by The Prince's Regeneration Trust and remains the only offer to save the building.
Perth City Hall had been a leading venue since 1911 until it closed in 2007. PCMT had envisaged that it would be reborn as a food hall as well as providing training spaces in food production, marketing and retailing.
Nina Stobie, of Jones Lang LaSalle, said: "PCMT have not provided us with sufficient information or evidence to substantiate their claim that they could successfully redevelop the City Hall as described in their proposal."
The firm has recommended councillors apply for listed building consent to demolish the City Hall.