The development application for stage two of the project is to develop Blocks 1, 2 and 5 Section 96, a 2366 square-metre site, currently home to the Capitol Cinema.

The six-storey, five-star hotel proposed for the site includes 43 basement car spaces, a ground-floor lobby with five cinemas and a restaurant linking to Franklin Street.

Under the proposal, the first floor of the hotel would include a 500 person-capacity ballroom, meeting rooms and a lounge and gym for hotel guests.

The remaining four levels would include 122 hotel rooms.

The first stage of the project on blocks 3 and 4 has already received approval and work began in May with the demolition of the old post office building behind the main cinema on Franklin Street.

The site would operate as one development if the second stage receives approval.

"The Manuka Hotel development will be an iconic and prestigious building that is commensurate with its prominent location along Manuka Circle," the application read.

The application proposes to increase the gross floor area allowed under the Crown lease to 8502 square metres and to allow commerical use for at least 122 hotel rooms.

The application states a separate works approval will be lodged with the National Capital Authoritiy for proposed changes to the Canberra Avenue verge including replacing pavement and constructing an awning and signage over part of the Avenue.

The development is long-awaited by several traders in the Manuka Shopping Precinct, who hope it will bring new life to the area.