Construction is due to start on a major renovation of Cloisters Arcade and on an 11,000sqm office building above the arcade's Hay Street entrance in an $85 million redevelopment planned by the Anglican Church.
Global engineering firm Aurecon has pre-leased the first five levels of the 11-storey building that will be built by construction firm Probuild at 861-863 Hay Street, replacing the two-storey building built on the site in 1971.
The redevelopment of Cloisters Arcade, which runs from Hay Street through to St Georges Terrace will include a realignment of the arcade, with Shafto Lane to provide a north-south thoroughfare for pedestrians walking up Mill Street, through Cloisters Arcade and through Shafto Lane to Murray Street.
More than 2000sqm of retail space in Cloisters Arcade will be upgraded and new retail tenancies will include a restaurant fronting St Georges Terrace.
Existing tenants will be moved to other areas within the arcade during the refurbishment, which will include an outdoor courtyard covered with a louvre system.
The redevelopment will also include the progressive upgrade of the 15-level office building above Cloisters Arcade at 200 St Georges Terrace.
During the next five years, the building, which was also built in 1971, will be converted to a high-grade office tower with new lifts, air-conditioning, lobbies and wet areas.
Aurecon said it had outgrown its existing office at Septimus Roe Square and would move its Perth base to the new building.
Brian Dixon, executive officer and diocesan secretary for the Anglican Diocese of Perth said it was the right time for the property redevelopment.
"Property owner, the Perth Diocesan Trustees, has identified now as an opportune time to redevelop projects within the portfolio which have the potential to provide improved commercial, retail and social environments for the City of Perth," Mr Dixon said.
Advisory firm Beck Advisory, which is guiding the redevelopment, said the project would reactivate a key CBD site which was not being utilised to its full potential.
"The Hay Street frontage of this site is ideally suited for an A-grade commercial building and it will be a welcome addition to the city centre, particularly as the Perth office leasing environment is one of the tightest in the country," director Hamish Beck said.
As well as being the anchor tenant in the new building, Aurecon will also provide structural and services engineering for the building.
Probuild expects the new tower and arcade renovation will take 18 months.
The Cloisters, a historical building built in 1858 and positioned in front of Cloisters Arcade on St Georges Terrace will remain untouched throughout the development and the heritage-listed Port Jackson fig tree fronting the Terrace will also be protected.