Preliminary plans for the Kingston Arts Precinct ignore the heritage value of the site, the Kingston and Barton Residents' Group says.
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The group's president, Rebecca Scouller, said there was one chance to get the precinct right and current plans appeared to ignore an ACT government masterplan for the site.
"The Kingston Arts Precinct needs to be world class, fit for purpose and well built.
"It also needs to honour the foreshore precinct, its heritage and story, and deliver according to the master plan which includes several references to connectivity between the precinct and the lake," she said.
The 2013 masterplan for the site called on development to "retain local views of the heritage buildings and views to and from the lake and Wentworth Avenue".
ACT National Trust spokesman Eric Martin said it would be unfortunate to compromise views of the heritage powerhouse building.
"While it's good to see something on the site after all, and I think an arts precinct is a suitable use around the glassworks, I think I'm concerned about the intensity of development and proximity and closeness to the powerhouse," he said.
Artists' impressions show the heritage buildings surrounded by new development.
Documents prepared by the developer said the new buildings referenced the location of former structures between the powerhouse and Wentworth Avenue and visitors "don't want to be able to see everything from everywhere".
The powerhouse and Fitters Workshop buildings were "'framed' by the new buildings, thereby bolstering their perceptual importance", the document said.
The plans are still subject to approvals, which includes assessments by the National Capital Design Review Panel and the ACT Heritage Council, an ACT government spokeswoman said.
The ACT government on Monday confirmed it would own the arts facilities and the public car park after the development is completed, which is expected in 2022-23.
"Resident organisations at the Kingston Arts Precinct will be charged a peppercorn rent which will be consistent with other existing arrangements for arts facilities across Canberra," an ACT government spokeswoman said.
Geocon managing director Nick Georgalis said the precinct was the most highly anticipated development the company had set out to achieve.
"Canberrans are looking to us, to bring culture, vibrancy and excitement to the Kingston Foreshore and we are now ready to deliver," he said in a statement.
Mr Georgalis said it would be a "legacy project" that could be part of Canberra's culture for more than 100 years.
"I am pleased to report that the plans we will submit go above and beyond what anyone could have dreamt for this site," he said.
Mr Georgalis said the site would include retail, restaurants, commercial office space and residential apartments.
"But most importantly for Canberra, this development will be built with the arts community as its focus. It will be a place where big ideas are born, where Canberra's creative heart can flourish," he said.
Some arts organisations involved in the negotiations for the site have said in a joint statement they are looking forward to being co-located in Kingston.
Megalo Access Arts chair Kate Ross said it would benefit the organisations to have more chances to collaborate.
"The Kingston Arts Precinct will become the beating creative heart of Canberra," she said.
However, the organisations have been made to sign confidentiality agreements and are prevented from further discussing the site's plans.
A spokeswoman for the ACT government said the Manuka Arts Centre would remain the property of the territory during construction at Kingston. Its tenants are expected to move to the new precinct.
"An alternative use for the space is yet to be determined," she said.
She said the government was working with Gorman House Arts Centre to plan for uses of the vacant gallery when the Canberra Contemporary Art Space moves to Kingston.
Ms Scouller said the Kingston and Barton Residents' Group wanted to see the Manuka site meaningfully re-purposed for community use rather than sold.
A design briefing for resident groups, art organisations and Fender Katsalidis, the precinct's architect, will be held in two weeks.