Learn Spanish (Spain): Es el mejor sitio de la ciudad.

When making a superlative statement like 'the best' or 'the biggest', Spanish uses de to say 'in'. You are literally saying it is the best place of the city. Using en here would sound unnatural to a native speaker.

Why is mejor placed before sitio? Don't Spanish adjectives usually go after the noun?

Yes, most adjectives go after the noun, like in el coche rojo (the red car). However, mejor (better/best) and peor (worse/worst) are common exceptions. They almost always come right before the noun they describe.

Could I use lugar instead of sitio to mean 'place'?

Absolutely! Both sitio and lugar mean 'place' and are completely interchangeable in this sentence. Sitio is just slightly more common in everyday spoken Spanish in Spain.

Where is the word for 'It' at the beginning of the sentence?

In Spanish, the pronoun 'it' used as a subject is almost always left out. The verb es (is) already carries the meaning of 'it is' all by itself, so you don't need an extra word.