The Ministry of Defence dropped a £200 million PFI deal to upgrade Chelsea Barracks in August last year and the future of the accommodation was put under review by the body's investment approval board.
Chelsea Barracks will be closed in 2008, and 300 army personnel will move to Woolwich, swelling numbers at the site to 1,000.
At that time the MoD will decide whether to keep Chelsea for other army uses, for other Government department uses or sell it off to a private bidder.
Mr Reid said: 'I think that Chelsea is a prime site in the centre of London. Anyone who wants it will have to find the right price to pay for it.'
The 6ha site between Sloane Square and the Thames could be worth as much as £250 million.