The council opted on Tuesday night for a tender recommended by staff from a pool of nine. Councillors are required to endorse contracts which exceed more than $1 million in value.

Drumberg Services Australia will carry out the work for $3.7 million, which lord mayor Nuatali Nelmes (ALP) said "looked great value for money".

"It would be wonderful is this car park wasn't at the end of its useful life and could be used, but it would be unwise to be putting our visitors and our citizens into an unsafe car park," she said.

"So we don't have many options but to move forward with demolition."

The seven-storey car park has been off-limits since it was closed last March due to structural concerns.

Cr John Church (IND) said the city had been "denied those 380 parking spaces" since that time and asked staff whether there was any "short to medium-term work" being carried out to find replacement spaces "whether it be in the city's east or west".

City of Newcastle chief executive officer Jeremy Bath said about 45 additional parking spaces would soon be created on land the council acquired from the state government last year adjacent the existing Boat Harbour car park near Scratchleys restaurant.

However, he said there had been a "significant reduction" in the number of motorists wanting to park in the city because many city workers now "had a desire" to work from home.

"I don't see an imminent issue with regard to the number of parking spaces that are available in the city," he said.

The council is in talks with Iris Capital, which owns land adjacent to the car park, to use both sites to construct a stairway linking the harbour foreshore and Christ Church Cathedral.

Iris would need alter its existing development plans and include 380 parking spaces to replace the car park, but has offered support for the concept to date.

A contract for the car park demolition will be formally signed next month. Work will begin in August with hopes the project can be completed by November.

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