The historic building on Castle Street was due to be sold by Allsop auctioneers but attracted no bids – prompting the Friends of the Old Town Hall to demand action to save it.
Coun Mazher Iqbal, executive member for city futures: development, culture and regeneration, said it was an important part of the city’s heritage and they would liaise with partners about its future.
He added: “It’s very disappointing that the Old Town Hall failed to sell at auction. The building is an important part of Sheffield’s heritage and is a key part of Castlegate. We know that the building is a challenge for developers and sadly this has been reflected in the lack of bids yesterday.
“We have ambitious plans for Castlegate and have recently secured £20m funding from the Government’s Levelling Up Fund to transform the area. We will now be liaising with partners to consider how we can work together to secure the future of this historic building, whether this is through public or private investment.”
The Old Town Hall had a sales figure of £750,000 - a big drop on its original £1.35m asking price.
The Grade 2 listed building was put up for sale in the summer by receivers appointed after the collapse of Aestrom OTH Ltd, the company set up to restore the building.
Valerie Bayliss, chair of the Friends group said: "We know – after seven years’ hard work on assessing the condition of the building, and what could be done with it - how critical it will be to the future of the whole area.
“If Castlegate is to be revived the Old Town Hall has to be sorted, and if the Old Town Hall is to be sorted then Castlegate has to be sorted. The two are interdependent.
“It’s time for some serious thinking. We call on the council to do just that and to seek out partners to develop a practical and feasible solution. It won’t be a quick or easy ask, but the city can’t afford to leave the building to rot any longer.”