A local developer is planning a $2 million mixed-use project for a vacant parcel along Madison Avenue just south of downtown Indianapolis.

The plans from Keystone Group call for a three-story building immediately north of a new Bureau of Motor Vehicles license branch at the southwest corner of Madison and Terrace avenues. The first floor would be leased for office or retail uses, and upper floors would be apartments.

The developer won zoning approval this month from the Metropolitan Development Commission after making adjustments to an early site plan, said John Bartholomew, a spokesman for the Department of Metropolitan Development.

The plans filed with the city show a second three-story building to the north of the one the city approved. Keystone will add the second structure, also with apartments and retail space, at a later date if demand continues to grow in the neighborhood, said Tara Acton-Shaver, property manager for the privately held construction and development firm.

The company is partnering with Concord Community Development Corp. on the project, which could provide a residential boost to an area that had been zoned for light industrial.

The apartment portion will include units set aside for a variety of income levels since some funding will come from the federal Neighborhood Stabilization Program, said Mark Flanary, Concord's executive director. He said the first building will cost about $2 million.

"A mixed-use project like this is invaluable for revitalizing our neighborhood," Flanary said. "The impact is going to be fantastic, especially with the retail portion. We're hoping to see even more mixed-use, and we hope to springboard off this project."

Keystone acquired the 2.8-acre, triangle-shaped parcel in 2009. It was then home to three vacant industrial buildings and a remaining wall from an old brick warehouse, which the company tore down.

The site is across the street from Sisters' Place Restaurant, and just south of Madison Plaza, a 180,000-square-foot office conversion project also by Keystone.

Before Keystone made changes to its proposal, city planners had expressed concerns about the compatability of the project with the neighborhood and the suburban-style arrangement of the proposed buildings, set back from the street with large parking lots in front. The proposed buildings also would be taller than what is normally allowed under city code.