Cheshire East is in talks with an unnamed developer over possible plans to build more than 300 homes in Crewe town centre.
The council-owned former Royal Arcade site, which was originally earmarked for a leisure-led mixed-use development, has remained effectively vacant since the shops were bulldozed in 2021.
Only the multi-storey car park and new bus station are currently on the site.
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But next week councillors will be asked to give the go-ahead for a business case relating to a potential residential-led development scheme, which would include the undeveloped part of the Royal Arcade site, Chester Street Car Park and Delamere Street Car Park.
A report to next week's meeting of the economy and growth committee says: "Over recent months, the council has engaged with a well-known developer of residential-led mixed use schemes in places with similar economic challenges as Crewe...
"They have developed, at their own cost and risk, initial plans for a significant redevelopment scheme in Crewe town centre.
"They have also undertaken a high-level development appraisal – viability assessment.
"Despite the challenges this presents they are confident that they can deliver a scheme in Crewe that will transform it, with at least 300 residential units of different forms, for example single-storey apartments, town houses, etc, with active ground floor uses, suitable for retail, restaurants/cafes, offices or other complementary uses, potentially including some public sector functions such as health and learning."
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The report says the town centre multi-storey car park, with 389 parking spaces, was developed to provide capacity for when existing car parks are redeveloped and it should be sufficient to accommodate future demand in Crewe, including for a new residential population.
But it adds: "If development extends to encompass Delamere Street car park [which has 112 short stay spaces] and Chester Street car park [which has 127 long stay spaces] , there may be need to review the operation of parking stock within the town centre."
In a press statement, deputy leader Michael Gorman (Ind), who chairs the committee, said: "Our ambition for Crewe is for it to become the 'best small city' in Europe by 2050, with the 'Crewe360 hub' at the core of this vision – a transformed railway station gateway designed to anchor long-term growth.
"We have also been delivering a range of transformative regeneration projects for Crewe.
"This report marks the beginning of the next phase in regenerating the town centre – laying the foundations to create a place that truly works for residents and businesses and helping us attract the investment needed to bring our plans to life.
"We want to build on the success of recent regeneration projects, move away from simply relying on the struggling retail sector and unlock new opportunities for growth.
"While we recognise there are risks, particularly around funding and market conditions, we believe the potential rewards for Crewe and the wider borough are too great to ignore."
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The council has already delivered a number of projects for the town including the market hall, lifestyle centre, and Lyceum Square event space, known as Ly2.
Other projects underway include The Dome Youth Zone and Cheshire Archives Crewe.
The economy and growth committee meeting takes place at Macclesfield Town Hall at 5.30pm on Tuesday, September 9.