More than two years after it was gutted by a fire that turned it into an eyesore, a four-story commercial building on Canal Street is being redeveloped into a mixed-use project that will include retail space and 47 apartments to be used as commercial short-term rentals.

The building on the city's former main commercial corridor is owned by controversial T-shirt shop king Kishore “Mike” Motwani, who has drawn the ire of many in and around the French Quarter and Central Business District over what critics say is his record of flouting development restrictions as well as his penchant for operating T-shirt and souvenir shops.

The upper floors of some of Motwani's buildings, like the fire-ravaged 1016 Canal St., are vacant or used only for storage, while the ground floor in most cases includes retail that generally caters to tourists.

Now, by adding apartment units to the upper floors, particularly on Canal, Motwani and commercial short-term rental operator Sonder hope to find a use for the vacant space while attracting more foot traffic and higher-quality retail options to the ground-floor businesses.

What’s more, they say, their approach would offer new lodging options for tourists looking to stay near the French Quarter, and possibly take some pressure off popular neighborhoods like Bywater and Marigny, where the influx of activity, especially of short-term rentals, has angered many residents and caused housing prices to spike.

Although the City Council continues to consider how to tighten up the city's short-term rental regulations, the idea of converting upper floors of some Canal Street buildings into such rentals has gained the support of at least one council member.

However, one potential restriction being floated would prohibit most multiple-unit residential properties, such as 1016 Canal, from renting out more than a quarter of their units to tourists, a policy that could jeopardize efforts like Sonder's.

Aaron Motwani, CEO of Quarter Holdings, the Motwani family company that owns 1016 Canal, said the work there was “a long time coming,” partly due to financing that collapsed after First NBC Bank failed in April 2017. But now, partnering with Sonder on a 10-year lease offered a new option for using the building's space, he said.

“Canal Street has always been tough to attract retail and residents,” he said.

Construction is expected to begin next week. Officials with San Francisco-based Sonder held a groundbreaking ceremony at the building Monday, joined by Mike Motwani and Aaron, his son.

The area surrounding that building has changed in recent years, particularly as downtown living continues to draw interest among young renters and second-home buyers.

Across Canal Street, work is underway on a 350-room Hard Rock Hotel, while publicly and privately funded projects like the revival of nearby historic theaters have breathed new life into the area, especially in the evening hours, when it once felt like a ghost town.

The Metairie-based Quarter Holdings acquired the buildings at 1016-22 Canal St. for $935,165 in 2006, according to Orleans Parish Assessor’s Office records.

The Motwanis own more than 40 properties in New Orleans, mostly in the CBD and French Quarter.

The buildings at 1016-1022 Canal, which date back to the early 20th century, were among the few along that stretch of Canal to feature bay windows. For decades, they housed multiple retailers, including longtime tenants Schiro’s shoestore and Robert’s jewelry shop, according to the Downtown Development District.

It took more than 90 firefighters almost nine hours to gain control of the January 2016 fire, which ranked among the worst to hit the city’s historic core in years. A 25-year-old homeless man was accused of starting the fire in an alcove in order to keep warm. He was later declared mentally incompetent, and the charges against him were dropped.

Looking ahead, Sonder is eyeing further expansion along Canal Street at two other Motwani-owned properties: 623 Canal, a $9 million project that will include ground-level retail and about 20 apartments that will be used for short-term rentals, and 444 Canal, known as the Sanlin Building, which could cost roughly $35 million and include nearly 80 units.

Peter Bowen, Sonder New Orleans’ general manager, said he hopes to have the three projects up and operating within three years.

On Monday, City Council President Jason Williams expressed optimism that Sonder’s approach would help efforts to bring more big-box retailers, such as an Apple store or Pottery Barn, to Canal.

“New Orleans is significantly under-retailed, but it’s not because we don’t have people with resources who want to spend money,” he said. “It’s because of our lack of investment over a period of time.”

Sonder operates about 350 commercial short-term rental units in the city, according to Bowen.

Meanwhile, the City Planning Commission is set to hold a hearing Oct. 23 as the city studies ways to improve Canal Street between Claiborne Avenue and the Mississippi River. That effort may involve offering incentives for property owners to convert upper floors into short-term rentals, which could spur revitalization and lead to a better mix of businesses on the ground floor.

On Monday, Williams said that adding short-term rentals to fill the upper floors of more Canal Street buildings could help lift the city's onetime main commercial corridor by attracting leading retailers.

“We can use short-term rentals to revitalize Canal Street, not just for the people that will stay here but for all of the citizens of New Orleans, to bring back what we know Canal Street once was and what Canal Street can be again,” he said.

Follow Richard Thompson on Twitter, @rthompsonMSY.