The factory, located in Gorton St, will be built for Aitken Joinery.
Aikten Joinery Southland branch manager Brodie Andrews said the project was the "next phase" of the company.
"It’s exciting. It’s been [in] the works for a long time, been talked about for a long time.
"To actually see some movement is good and hopefully everything goes good."
The old factory would be kept, he said.
"We will still have it but everything that’s out there will move over to the new factory.
"There’s a lot of new things coming that we don’t have in our factory at the moment."
The new build would allow the company to use its space more efficiently, he said.
"We need [to] capitalise on space, which we’ve done the best we can with the efficiencies we’ve got.
"Basically we’re at peak again, max capacity I guess you could say, so we sort of need the extra room."
The Gore factory supplied the Queenstown, Cromwell and Gore branches of the business.
Part of the building was previously occupied by Farmlands and then The HIIT Studio, Mr Andrews said.
The idea to move to the new factory had come up about three years ago.
Demolition had begun in the past month or two.
It would take 12 to 18 months to complete the build.
"It’s really just in the [demolition] stage at the moment.
"Then after we get the site back to flat, then the builders will give a bit of a timeline of when we can start."
K2 Kontracting had done the majority of the demolition.
"Hopefully, with the director leading it, we can build something that’s going to be innovative as well as market-leading as far as aluminium windows in Gore is concerned."
