The Grade II listed art deco building on Newgate Street, had been closed since 2007, though the food hall stayed open until 2011.
Now, it is being transformed into a 184-bed Premier Inn, along with retail and leisure units and an NCP car park.
Interserve is managing the project’s delivery on behalf of DTZ Investment Management and expects more than 600 people to work on the project up until its completion in December 2015.
The firm aims to place 80% of the project’s £17m contract value with local businesses.
The iconic art deco building extends to nearly 170,000 sq ft over six floors and has been a feature of the city’s skyline since it opened in the 1930’s.
With its twin towers, sweeping curves, huge windows and marble staircases, the city-centre building was once Newcastle’s most elegant shopping outlet.
“It is great to see many of the iconic features of the building being sensitively replaced or restored while fully modernising the building for future tenants,” said Interserve Developments Director Dan White.