One of the building's owners, Central Otago Mayor Malcolm Macpherson, said he expected it to be operational early next year.
He said the whole interior of the former PGG Wrightson depot on Tarbert St would be ripped out before the building was reconfigured and additions made.
The building is owned by a group of people who all have connections with the town's three medical practices - Central Medical Centre, Cornerstone Health and Centennial Health.
Once it is completed, the new medical centre will be home to these practices, but Dr Macpherson said they would not be merging.
"Although they will be under the same roof, they will be trading as separate businesses.
"It just makes sense to have a common front end.
"Not only does it make commercial sense because of economies of scale, it also makes professional sense, because information can be shared."
Dr Macpherson said there was a nationwide move towards integrated health centres, which was what the new Alexandra centre would be.
He said it also had the potential to house a small pharmacy, and other health providers, such as a physiotherapist.
The idea of one medical centre for Alexandra had been around for about 10 years, Dr Macpherson said, but it was only coming together now because it took a while for the right site to be found.
There were also concerns it could breach anti-competition laws under the Commerce Act.
Dr Macpherson said the proposal recently gained momentum as some surgeries were "beyond their use-by date".
Moving to a purpose-built facility made perfect sense.
Changes in staffing levels were unlikely, he said, as the three practices were going in as they were.
