The state government has announced it will repair the former Wickham School of Arts building, "giving it the best opportunity to be re-purposed as part of a future development".
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Hunter and Central Coast Development Corporation has lodged a development application to demolish the cluster of buildings and sheds around the School of Arts as it prepares the surrounding site for sale.
But the heritage-listed 1882 school will have its roof replaced and other works to "improve the viability and safety of the building".
A heritage report, prepared for HCCDC in May and released under freedom-of-information laws, recommended that the corporation explore an "adaptive reuse" of the building.
The consultants, City Plan, said the building was in "surprisingly good condition" but recommended a detailed condition survey and a schedule of repair and maintenance works.
City Plan stopped short of recommending that the building's official heritage significance be upgraded from local to state level, which would prevent it from being knocked down.
HCCDC demolished the old Store building, also listed as an item of local significance, in nearby Hunter Street in 2018 to make way for DOMA Group's redevelopment of that site.
The National Trust, Newcastle MP Tim Crakanthorp and lord mayor Nuatali Nelmes have called for the School of Arts not to meet the same fate.
Planning Minister Rob Stokes told parliament this year that "the suitability of the building to be adaptively reused will be considered in detail when future development proposals are assessed".
HCCDC acting chief executive Valentina Misevska said on Wednesday that the repair works "will maintain the heritage integrity of the building, giving it the best opportunity to be re-purposed as part of a future development".
"The DA also includes removing the non-heritage annex built in the 1950s and removing two neighbouring buildings that are not heritage-listed," she said.
"The sandstone kerb identifying the former Hannell Street alignment will be retained."
Mr Crakanthorp, who obtained the heritage report last week after a freedom-of-information request, said he was pleased the consultants had recommended repairing and reusing the building.
"The Newcastle community has made it very clear that they want to see this building retained, but any adaptive reuse also needs to allow the community access and meaningful activation," he said.
Mr Crakanthorp reiterated that the building, which is linked to the formative years of writer Henry Lawson, needed state heritage listing as the "ultimate protection".
"As we saw with The Store, local heritage significance is not enough to save a building from the wrecking ball, and the last thing anyone wants to see is a beautiful old building lost."
HCCDC contacted the Hunter committee of the National Trust before lodging the development application.
The committee responded on Monday via a letter which suggested "any retained elements should be appropriately conserved &/or repaired & retained in a meaningful connection to their setting".
It called for a heritage assessment and conservation management strategy, the latter made public, before work started.
"If it is deemed necessary to demolish any historic fabric, then it is strongly requested that an archival record be taken," the letter reads.
"This applies to the surrounding buildings, Vigilance Hall, Hannell St, significant views to/from the WSoA to the harbour, & any internal fabric/layouts of the WSoA."