The Word development is part of Muse's £100 million 365 Plan and will form the North East Centre for the Written Word project.
Plans for the town centre development include exhibition spaces, a computer gaming area, a design studio with 3D printers, digitised archives and meeting rooms.
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A children's story telling area, OpenZone IT suite, café and rooftop restaurant will also be built.
Council Leader Iain Malcolm said: "The start on site for The Word marks over two years of hard work.
"This phase of the redevelopment will also see much needed improvements made to the adjoining Market Place and a new 40-space car park."
David Wells, Development Director at Muse, said: "We have made significant strides behind the scenes on the 365 masterplan, however getting the physical construction underway is the most significant milestone."
Bowmer and Kirkland has been appointed as main contractor.
The development is expected to be completed and open to the public in late 2016.
(LM/CD)
