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The Wilson Parking building on the corner of Cumberland and St Andrew Sts has so far not been confirmed as having been sold to the Ministry of Health.
However, ministry ownership of the building - and soon - is essential for the first stage of the hospital.
A fast-tracked hospital build announced late last year means an outpatient and day surgery building is planned for the site, and the ministry has said it plans to start demolition early next year.
The ministry can use the Public Works Act to take ownership, but that can take six to 12 months, with the possibility of Environment Court action extending that time.
The Otago Daily Times understands, however, there has been development in the negotiations.
The ministry responded to requests for information yesterday with a one-line statement, saying ''negotiations are progressing well and we expect to complete the sale process for the Wilson's block in time for demolition to begin in early 2020''.
Otago Land Group Ltd's Martin Dippie, who owns land between Cumberland and Castle Sts by Hanover St, and has VTNZ and Wilson Parking as tenants, said negotiations at the north end of the block were ''a very slow Government process''.
There had been no major developments in the sale process.
Building the hospital on the reclaimed land and the Cadbury block to the south would take some engineering skill, Southern Partnership Group chairman Pete Hodgson said yesterday.
While the ground was ''bad'', it was consistent across the site, which helped.
Mr Hodgson said planners were concerned the Cadbury block would be half silt and half gravel, but that turned out not to be the case.
''We're not building half the building on one substrate, and another half on another substrate.
''And that's apparently good news.''
There were engineering options to deal with it, including the possibility of a platform base rather than piles.
That would mean something similar to a concrete pad 3m thick 6m underneath the building.
Engineers were ''keeping their options open''.