Employees of Dunedin's Cadbury World will be casualties of the city's new hospital, with the tourist attraction confirmed to close to make way for the rebuild.

Photo: RNZ / Rebekah Parsons-King

Health Minister David Clark announced today the new hospital will be built on the land formerly occupied by the Cadbury factory and parts of surrounding blocks.

Cadbury owner Mondelez International area vice-president Amanda Banfield said that meant the closure of the city's Cadbury World attraction, which was undergoing a $7 million redevelopment.

Thirty-nine staff members would lose their jobs and the company was consulting with them, she said.

She was disappointed the Cadbury World redevelopment would not be going ahead, as Mondelez had invested significant time, energy and resources into the project, she said.

Mr Clark said today's hospital location announcement was a "major milestone".

"Everyone knows the current hospital buildings are in a bad way, with leaks and asbestos - and they are deteriorating. I'm pleased that after years of delays we are finally on the way to providing the 21st century health facilities the people of the region deserve."

Photo: Supplied

He said the government was negotiating with the owners of the Cadbury site and had begun the process of purchasing the city block next door to the North.

"The hospital will not only be the largest building in Dunedin but also one of the most complex and challenging construction projects ever seen in New Zealand," Mr Clark said.

Two options for the configuration showed the main hospital building being 10 storeys high, however, any design and concept would be discussed further down the track.

Photo: RNZ / Rebekah Parsons-King

The government has pledged to break ground on the $1.4 billion rebuild before the 2020 election.

Dunedin mayor Dave Cull said keeping the hospital in town was very important.

"It kept it connected with the medical school of the university, it kept it in the CBD which was crucial to the commercial viability of the centre of town. There were a number of reasons, but it would have been an absolute travesty to rip it out of the centre of town, away from the university, away from the CBD."

It was great to have certainty.

"I think it's great to have a realisation that the amount of land that has been earmarked for the hospital includes room for expansion and room for green space," he said.

"So that's very far sighted and very prudent of the government not just to be trying to come up with the most constricted, cheapest option."

An announcement was expected a month ago, but Cabinet delayed its decision while it gave further consideration to the project's business planning.

The man steering the rebuild, Southern Partnership Group chairman Pete Hodgson, said it was a big day for the city and region.

"We are able to say we're going to have a hospital and it's going to be here."

The final site was the same as recommended to cabinet by the Southern Partnership Group, and would continue to support the important links between Otago University and the hospital, Mr Hodgson said.

There were still some hurdles to overcome and Mr Hodgson said talks had already begun with Mondelez, Cadbury's owner, and the eight owners occupying the Wilson block.

"The businesses will still be open tomorrow and next week and next month because there is a period of time taken to secure the land," he said.

"The process is under the Public Works Act, but need not necessarily involve compulsory acquisition and hopefully will not."

The need for a complete rebuild was spelled out by Southern DHB commissioner Kathy Grant.

"The reasons are pretty obvious. Our current buildings, and in particular our clinical services building, are no longer fit for purpose," she said.

"Our patients deserve to be cared for in better facilities and our staff deserve to work in better spaces."

A detailed business case is expected by mid-year and design plans will follow.

Photo: Supplied

Timeline

1851 - Dunedin's first hospital is built in the Octagon.

1865 - It moves to the site of the present hospital.

1967 - The current seven-storey clinical services building is commissioned.

October 2013 - Ngai Tahu expresses interest in a private-public partnership rebuild of Dunedin Hospital. The Government pours cold water on the proposal.

2014 - Then-opposition Dunedin MPs, Clare Curran and David Clark, host a meeting of more than 100 people where issues with Dunedin Hospital, such as leaking operating theatres, are aired.

April 2014 - A 13-year-old's spinal surgery is delayed as rain water leaks into his surgical theatre during a downpour.

May 2014 - At a Southern District Health Board meeting, the rebuild is discussed by the debt-ridden board. Estimates of $250 million to $500 million for the rebuild are suggested and board members are told a new facility would be five to seven years away.

August 2014 - During the election campaign, then-Labour leader David Cunliffe pledges $250 million to rebuilding Dunedin Hospital if elected. The government consistantly says Southern DHB needs to sort out its finances before a rebuild can be considered.

February 2015 - The Southern DHB makes a $25 million request to the government for urgent new facilities during the rebuild's planning.

March 2015 - The Ministry of Health forms a group to plan the rebuild of Dunedin Hospital's clinical services building.

During a visit to Dunedin, then-Health Minister Jonathan Coleman says cabinet will consider a business case for the clinical services rebuild "sometime next year". The Government had previously said the business case would be considered in 2015.

June 2015 - The Southern DHB is sacked by Minister Coleman and commissioner Kathy Grant is installed. The Minister says the cost of a rebuild is likely to be $300 million.

October 2015 - The Southern Partnership Group is appointed to oversee the business case for the rebuild, at its helm is Hawke's Bay District Health Board member and consultant Andrew Blair.

August 2016 - Then-Prime Minister John Key promises those at a National Party fundraiser at Balmacewan Golf Club, in Dunedin, the hospital will be rebuilt or renovated.

September 2016 - A strategic assessment for the Dunedin Hospital redevelopment describes the existing facility as crumbling and uneconomic to repair.

March 2017 - The Dunedin City Council launches a campaign to keep a rebuilt hospital in the central city after concerns it may be located elsewhere at a greenfield site.

June 2017 - Dunedin North MP David Clark reveals sources tell him a rebuild may balloon out to more than $1 billion.

August 2017 - During the election campaign National pledges to spend at least $1.2 billion rebuilding Dunedin Hospital with a private-public partnership a possibility. The rebuild may take up to a decade, the party says. Labour pledges to spend to spend about $1.4 billion on the rebuild if elected with no private-public model and for construction to begin before the next election.

December 2017 - New Health Minister David Clark terminates Andrew Blair's role as head of the group overseeing the rebuild and appoints former Labour MP, and his predecessor in Dunedin North, Pete Hodgson. Mr Hodgson confirms the rebuild will occur in Dunedin's CBD with the Government to have a recommended site by the end of March 2018.

January 2018 - Prime Minister Jacinda Ardern again commits to breaking ground on the rebuild by the next election.

March 2018 - The Southern Partnership Group's recommendations on the rebuild site go to cabinet.