The £5m development will see new homelessness accommodation and a support facility built in the area.
Working along Kier Construction, Aberdeen City Council has said the development will be located on the site of the former Victoria House in West North Street.
The new homelessness unit will comprise of a three-storey block for short-term supported accommodation for homeless people, providing 20 bedsits with en-suite shower facilities, while communal facilities will be provided at ground floor level, comprising kitchen, laundry, lounge and staff accommodation.
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A six-storey block will provide 20 flats, ranging from one to four-bedroom properties, for independent living for homeless people in a secure environment.
The work is expected to be completed by summer 2014.
Aberdeen City Council Housing and Environment Convener, Councillor Neil Cooney, welcomed the news.
He said: "Aberdeen City Council's homelessness service has made considerable improvements to its response to homeless households over the past two years.
"All unintentionally homeless households are now entitled to settled accommodation and temporary accommodation is being made available to all households who require it.
"This flagship development of 40 units of accommodation will ensure that we are there to continue to prevent or alleviate homelessness."
(JP/IT)
