A report presented to councillors last week showed the council had reduced its funding for the arcade redevelopment by $6.5 million, bringing its total contribution towards the project to $22.6 million down from the previous $28 million.

According to the report, the funding cut was due to “reduced costs for returnable works”.

InDaily asked the council to explain what that meant and what impact the funding cut might have on the overall development.

In response, the council’s city shaping director Tom McCready said the reduction in funding was “due to negotiated outcomes which are commercial in confidence”.

The council announced in 2019 that it had chosen to partner with Melbourne-based property developer ICD Property to transform the ageing Central Market Arcade into a 38-storey retail, office, hotel and residential development.

At the time, it said the total cost of the redevelopment was in the order of $400 million, with the council funding its portion of the build by selling ICD Property the “air rights” – or empty space – above the existing arcade.

In a statement, ICD Property managing director Matt Khoo said any changes in the council’s investments would not impact the project.

“Market Square has experienced incredible success and momentum, from selling over 80% of residences to completion and opening our Display Suite, we are extremely proud and excited about the project’s future,” he said.

“Any changes in the City’s investments will not impact the project which is progressing positively and on track for construction in June 2022.”

Once complete, ICD Property will own and manage the central tower – named Market Square – which will include the residential, office and hotel component of the development, as well as an elevated 3000-square-metre public terrace.

The bottom floors will be connected to the Central Market and will include a range of food, wine and homewares shops, as well as restaurants, cafés and bars which are planned to be open 18-hours a day, seven days a week.

According to the council report, ICD Property has engaged building contractors ahead of construction starting in June next year.

“Development of the concept design, including Council’s returnable works, has significantly progressed,” the report states.

InDaily reported last week that ICD Property would on November 28 provide formal notice to the council of its intention to start construction in June.

Some “enabling works” to prepare the site for redevelopment are expected to start before June, during which time the Central Market Arcade will remain open.

ICD Property expects construction will take three and a half years.