A former library building will be demolished as part of a town centre's ongoing regeneration.
Durham County Council said it is "transforming unused areas" to help increase footfall in Spennymoor.
It plans to build a walled garden and install new paving, bollards, seating and lighting in the town centre.
The scheme, which is being carried out over three phases, is being funded by the authority's towns and villages fund.
It follows the purchase of land on the Festival Walk development, which councillors approved several years ago.
The council said it would also acquire a number of derelict properties in Cheapside and remaining units at Festival Walk.
Meanwhile, it plans to raze garage buildings in Spring next year.
Elizabeth Scott, cabinet member for economy and partnerships, said: "We want to enhance our centres by transforming unused areas, such as empty units, into attractive and vibrant public spaces that support an exciting retail and leisure offer.
"This, in turn, will help the development of existing and new businesses, which will benefit from the increased footfall."
Festival Walk's former owners went into administration in 2009. By 2016 the council said nearly two thirds of its capacity was vacant.