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A new four-storey office building for 650 workers in central Dunedin has been welcomed as a significant economic boost for the city, but small businesses in the area are concerned about the loss of car parks.

The 125-park Dowling St car park has been bought from the Dunedin City Council for $3million by Ngai Tahu, which will build the state-of-the-art office block for Accident Compensation Corporation (ACC) to move into in early 2024.

ACC has agreed to lease the building for 20 years.

The 8000sq m development, the cost of which is commercially sensitive, will feature corporate sustainable design features, capacity for 80 bike parks and multiple charging stations for electric vehicles, including cars, bikes and scooters.

ACC’s 650 Dunedin workers at present work at four different sites around the city.

ACC chief executive Scott Pickering said the site cemented a commitment to Dunedin and reflected the development of an enduring relationship with Ngai Tahu.

"This complex will be a symbol of the strength of that partnership and we look forward to building on that in the mahi we will do together in the coming years."

Ngai Tahu Holdings Group chief operating officer Craig Ellison said it planned to start tendering the enabling works in June or July next year.

While no contractor had been appointed at this stage, it was estimated about 100 workers could be on site during the build.

It was not expecting much overlap in construction activities with the new Dunedin Hospital.

"Many subcontractors are increasing their resources in preparation for the hospital and so we expect there to be adequate workforce available."

Part of the agreement with the council is the whole site will be used for the building, but some businesses in the area are concerned the loss of car parks will force them out.

Les Mills Dunedin club manager Peter Lee said just about all of its 3500 members used the car park, and the business may have to look at relocation.

"We really need at least 30 to 40 car parks nearby.

"It’s disappointing there are no plans for a car parking building. That puts our business in jeopardy ... we don’t know where else people can go and park close to the gym."

He was open to suggestions about where members could park, but it was "critical they have somewhere to go".

Dunedin commercial and portrait photographer Clive Copeman, who is based in the historic Imperial Building on the corner of the site, said he was told of the plans yesterday morning.

"I’m certainly concerned for my business ... my customers are already saying it’s not convenient for them to find a park.

"I can see the benefit but I really hope council considers how the loss of parks will impact us in the area."

He said he would seriously consider moving or, "worst-case scenario", closing his business if parking became too difficult.

Harcourts Dunedin branch manager Richard Stringer said the site was primed for redevelopment and positive for Dunedin, but was concerned about replacement of the car parks for his staff and the wider public.

Mayor Aaron Hawkins said the council was looking at the issue of parking holistically across the city and did not have specific plans to replace parks lost in Dowling St.

There was time for users of the car park to find alternative arrangements, he said.

"It’s not happening tomorrow.

"This is really positive for the city, consolidating [ACC’s] work force and committing to the city for 20 years.

"It’s a better use of the space."

It had long been earmarked by the council as a site for future development.

"This is an exciting development ... it’s the first significant office building in the last 20 years, particularly in that area.

"It will create jobs across the construction sector. It’s being procured sustainably and locally where possible."

Bloke Barber and Stoop Coffee owner Keri O’Connor, whose business is across the road, said she was thrilled at the news.

Construction workers and employees based out of the future building would need haircuts and coffee, and her businesses could provide both.