WORK on a new £5 million scheme to revamp part of the heart of historic York into new stores and luxury homes will begin next month.

Much of Stonegate Walk, the troubled L-shaped arcade whose 23 small shops are linked by alleyways to Stonegate and Blake Street, will be demolished in mid-February to make way for an award-winning concept.

The announcement today by site owners Wetherby-based Oakgate, comes at a crucially controversial time for York city centre traders, as a public inquiry investigates the merits of the Coppergate 2 proposals to redevelop land between Cliffords Tower and Piccadilly with shops, restaurants and apartments.

Opponents argue that Coppergate II will siphon shoppers and tourists away from roads like Stonegate.

Oakgate has teamed up with Bellway Homes (Yorkshire) at Stonegate Walk to create three large retail units totalling 15,000 sq ft of space, with 18 luxury apartments above, all with courtyard views of the Minster.

Bellway Homes, which has taken a lease on the site, is scheduled to finish the project by Easter 2003, but it is hoped that retailers can be trading there before this Christmas. Already, Oakgate has begun detailed talks with large chains keen to get a foothold in York.

Next, one of the existing retailers with a Blake Street frontage will continue, but Oakgate is not yet announcing who is in line to occupy the three other stores.

Alison Stewart, Oakgate's property development manager said: "We have had several offers and we are in active negotiations. There are one or two national names in the picture, including high fashion chains, as well as a regional retailer."

Oakgate, she said, was not opposed to the Coppergate II development. "York has to survive as a retail centre to maintain its vitality, and if we can't accommodate the pent-up demand for large shops, the big stores will go elsewhere. Of course, we can't supply all the demand and there will still be a need for good retail accommodation."

Ironically, John Regan, an architect involved in an alternative scheme to Coppergate, was responsible, alongside DJ Curtis, for the new Stonegate Walk project, which has already earned a Royal Institution of British Architects' award for innovative design. For the first time, two of the planned shops will have frontages on Blake Street, with secondary frontages and access from Stonegate. Some of the apartments will be created from existing buildings in Blake Street, but others will be new and all will have access from Blake Street via a lift and stairs to the development above the stores. They will have an open podium at first floor level with views of the Minster.

The project finally brings to an end the "white elephant" tag for a mall where much of its 20-year history has been plagued by empty shops because shoppers in Stonegate and Blake Street tended to pass by its connecting alleyways.

Six owners came and went before Oakgate moved in and submitted the plan, which last year won City of York Council approval.

Updated: 11:39 Monday, January 28, 2002