It's difficult to tell from the pictures, but if you have the space, I would consider a smaller retaining wall, part way down the slope - I believe that something up to 1.2m can be achieved with fairly limited engineering input. If you then left a small separation between the front of the wall and your new building for a suitable drainage system you could avoid any damp issues. Block and beam might be suitable for a roof/floor and could span the gap back to the original ground.
You need to be aware of any services - this sort of work often exposes gas, electric, water and drains. Sometimes you can work round them but otherwise they can be expensive to relocate.