With an eight-year battle over redevelopment of Assembly Square ended by compromise last week, construction on the project is expected to begin as early as next year.

The eight-year-old stalemate over redevelopment of Somerville’s Assembly Square ended last week as a community group, a furniture giant and a national real estate company reached agreement on the future of the 145-acre parcel.

After months of negotiations, the Mystic View Task Force, Federal Realty Investment Trust and Swedish home furnishings retailer Ikea reached a compromise on a shared vision of a transit-oriented, mixed-use development along the Mystic River. The pact ends years of litigation and allows construction to commence as early as 2007.

“Eight years is long enough,” said Wig Zamore, a founding member of Mystic View, a city-wide neighborhood group that has favored construction of a pedestrian-friendly neighborhood over a collection of big-box stores in a strip mall. “We didn’t want to spend the next 80 years on this.”

Under the terms of the agreement mediated by Douglas I. Foy, Gov. Mitt Romney’s former secretary of commonwealth development, Mystic View, Federal and Ikea agreed to promote business investment, manage traffic and address environmental concerns associated with the creation of an urban village at Assembly Square, an area bounded by Interstate 93 and the Mystic River. Among the agreements reached were allowing increased office and research-and-development space to enhancing the project’s tax and jobs base; formation of an independent Transportation Management Association that will be responsible for achieving traffic limits; and creation of a project advisory committee that will participate in the oversight and development of the area.

In the short term, Ikea and Federal pledged to build 1.7 million square feet of office and research-and-development space, a 340,000-square-foot Ikea store, up to 845,000 square feet of retail space and 2,000 apartments and condominiums. The two companies also agreed to contribute $15 million for construction of a Massachusetts Bay Transportation Authority Orange Line subway station at Assembly Square, matching the $25 million earmarked for the project by Congress.

The parties also vowed to work together to create new zoning regulations for Assembly Square that eventually would allow construction of a total of 5 million square feet of office and R&D space, 1.4 million square feet of retail stores and 3 million square feet of residential property.

“Through patience, hard work and the dedication of many different groups and individuals, we have reached a remarkable milestone in the history of economic planning and development for Somerville and for the entire metropolitan area,” said Somerville Mayor Joseph A. Curtatone of the compromise agreement.

William Shelton, a former Mystic View president and member of the negotiating team, said Assembly Square is the largest and best large-scale development site remaining in Greater Boston.

“Eight years ago, we advocated a development vision that would realize this potential, providing jobs, tax revenue, open space and public health for our community,” he said. “We deeply appreciate Federal’s hard work with us to see that potential through each other’s eyes and resolve real-world constraints to fulfilling it. Through this process, we have built the mutual trust necessary to effectively implement the agreement.”

The Final Frontier
Assembly Square, an area that Mystic View has christened Somerville’s “Last Frontier,” is remembered by many longtime residents as site of the Ford Motor Co.’s assembly plant where the Edsel was manufactured. By the 1980s, the abandoned factory was transformed into the Assembly Square Mall.

While the mall flourished for many years, the expansion of the Burlington Mall and the addition to the area of CambridgeSide Galleria caused sales to dwindle. Macy’s, Assembly Square’s anchor store, eventually closed. The parcel has been steeped in controversy ever since.

Newton-based National Development and Boston-based Taurus New England Investments Corp. bought the failed mall for $18.8 million in 1998. They planned to raze the shopping center and build a collection of big-box stores, including a Home Depot. Later, Swedish-based Ikea bought an adjacent 17-acre parcel along the waterfront and proposed construction of a 325,000-square-foot store. The mall and an adjacent 10-acre parcel were later sold to Federal for $64 million.

But by then Mystic View had already devised a vision for the area as lively district by the Mystic River. Activists opposed football field-sized stores and a sea of surface parking lots. Instead, they favored small stores and restaurants built around newly created streets with waterfront access and an Orange Line MBTA stop.

Following Dorothy Kelly Gay’s election as Somerville mayor in 1999, Mystic View actively lobbied her administration, arguing that more large stores would exacerbate already congested roads and further pollute the air. The group said a plan that included offices as well as housing and smaller retail sites would generate more tax revenues and the mix of uses would complement the riverfront.

At first, Kelly Gay embraced Mystic View’s idea for an urban village. But later the mayor disappointed many residents by favoring the developers’ plans for a new Home Depot and an Ikea store for the site. The two-term mayor was defeated in 2003 by Curtatone.

Last year, the Bay State’s first Ikea store opened in Stoughton, about 20 miles south of Boston, just off Route 24 in an area already filled with other retailers, including Jordan’s Furniture and a Christmas Tree Shops store.

The Stoughton store was quickly approved by Stoughton officials who said it would bring much-needed tax revenues despite the increase in traffic to the city.

Ikea says its stores attract between 1 million and 2 million shoppers annually. The Stoughton store has 1,400 parking spaces, employs 400 people and paid $72,955 in real estate taxes in fiscal year 2006 to the town.

Since its 1943 founding in Sweden, Ikea has offered affordable home furnishings and accessories for first-time home buyers, students and others on a limited budget.

Ikea has tried to get a foothold in Massachusetts since the 1990s, but the prospect of traffic jams has made it a challenge. In 1996, Wellesley rejected Ikea’s plan to build a store on 16 acres at the intersection of Routes 9 and 128.

Still, the Scandinavian furniture store could have challenges meeting the cap of 55,000 vehicle trips per day at Assembly Square. The agreement encourages Ikea to offer affordable delivery to local colleges and for customers arriving by public transportation.

“We are thrilled,” said Joseph Roth, an Ikea spokesman. “The Greater Boston area is large enough to support more than one store and we can’t wait to get a shovel in the ground.”