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The 140m-long, 17m-high former fabrication shop is the largest workshop on site.
The tinsmiths’ shop, which housed the staff lunchroom, is also being demolished.
Last month KiwiRail Group chief executive Greg Miller said the almost 100-year-old fabrication workshop was no longer fit for use.
He said the demolition was being closely managed because of asbestos in the buildings, which were built in the late 1920s.
Demolition would start at the northern end of the workshop and work southwards to Hillside Rd, he said.
The building would be replaced with a new mechanical workshop, which would allow up to 20 locomotives, wagons or carriages to be worked on at a time, he said.
The new site is expected to be operational by mid-to-late 2023.