Derelict factory buildings with rubbish strewn everywhere and broken window panes don't sound like appealing places to live.

But developer Squarepeg is hoping its plans to spend £40 million on the former Elizabeth Shaw chocolate factory in Greenbank will regenerate the area.

Architect George Ferguson believes the "Chocolate Factory effect" will replace the "Tobacco Factory effect" in transforming a disused site while preserving as much of the original character as possible.

Mr Ferguson, 61, who was behind the successful Tobacco Factory development in Southville, took the Bristol Post on a tour of the Greenbank site after Bristol City Council finally granted planning permission for the scheme earlier this month.

His aim is not to create another housing estate, which he argues the previous Persimmon plan to knock the old buildings down would have resulted in, but a lively community site that draws people in.

The plans include 252 homes, a mixture of flats and houses, with starting prices of around £100,000. Each building would also include a variable amount of business floor space on the lower floors and car parking.

Squarepeg will also spend £500,000 on providing space for the community on site. The Elizabeth Shaw reception building will be converted into a building for local people to use.

Building work is expected to begin in the autumn and take three years, with an estimated opening date of early 2013.

The construction phase will create 300 jobs, and commercial use up to 400 more.

Squarepeg also wants a chocolate maker as part of the commercial use.

Mr Ferguson intends to retain as much of the feel of the original site as possible, including the elevated walkways between a number of the main buildings.

He said: "We will be retaining all of the features that matter, like the metal windows but some of the industrial features will have to go, like the water tanks."

Along the southern end of the development will run two strips of so-called cycle-houses, the first of their kind in the UK.

The 22 properties will have garage space on their lowest level, which will allow residents easy access to the Bristol-to-Bath cycle path that runs alongside them.

This has raised concerns with some cyclists who fear the homes will be intrusive and have criticised the potential loss of a trip of hedgerow alongside the path.

A £12,000 consultation exercise held by the council last month showed most respondents did not want the land sold.

The council is due to make a final decision on the land sale, which it previously said would go ahead pending planning permission, by the month's end.

Squarepeg was refused permission for the plans in January, on the grounds it had not included enough affordable housing.

In the approved plans, the developer increased the homes from 14 to 25.

It had threatened that in the current financial climate its funding would be at risk if permission was not granted sooner rather than later.

But planning permission has now been given, and on the condition that work must begin within a year.

Mr Ferguson said his goal is to encourage cycling and involve the community.

He said: "I've been speaking to people from Birmingham to Bangalore about my cycle houses and there's real interest.

"Look at the activity you get at the Tobacco Factory. I think people will start talking about the Chocolate Factory effect. Just looking around the site you can see why I'm so excited by this."