A joint venture between developers CTP and Development Securities has started work on the long-awaited redevelopment of the Luneside East site in Lancaster's St George's Quay, to create housing and office space.
Funding of £4m was provided for infrastructure and site clearance from the Growing Places Fund managed by Lancashire Enterprise Partnership, administered on the partnership's behalf by Lancashire County Council.
The first stage at Luneside East involves demolishing unfit buildings and cleaning up contaminated ground.
In addition to initial remediation works, the first consented stage of development will create a new public square and 35,000 sq ft of business space through the refurbishment of St George's Mill on the quayside of the River Lune.
The remaining site has outline planning for further mixed use development including up to 350 apartments, a further 45,000 sq ft of office space, a 25,000 sq ft hotel and some 11,000 sq ft ancillary restaurant and café space.
Edwin Booth, chairman of the Lancashire Enterprise Partnership, said: "We intend to use the Growing Places Fund to maximum effect, which first means identifying high quality schemes with clear benefits and helping them happen as quickly as possible.
"Without the investment from Growing Places, some of these schemes would simply not go ahead.
"In each case we're looking to provide the final piece of the jigsaw that ensures the project gets off the ground. Often the investment will help overcome constraints around sites and infrastructure issues, or a lack of access to finance, for example."
The public finance will be recouped with interest and will be reinvested in other projects that also help to deliver economic growth.
Guy Illingworth, director of Luneside East Limited and CTP, said: "The site clearance phase was always a critical first step. The availability of finance for such projects is difficult to access and this phase would not have commenced without the help of the LEP, the county council and city council in providing Growing Places Funding. Together with our contractor, VHE, we are focused on delivering the remediation of the site for late summer 2013."
The site was acquired by Lancaster City Council with funding from the Homes & Communities Agency and the European Regional Development Fund. A gasholder has been removed already and full flood defences installed.
Planning permission was granted in December 2011.