Ground has broken on work associated with the building of a new convention and entertainment centre which is set to form a key part of the city’s transformation as an international hub and is part of a $2.5 billion makeover of the Darling Harbour precinct.

On Wednesday, State Premier Mike Baird and Deputy Premier Andrew Stoner announced that construction had begun on the International Convention Centre (ICC ) Sydney, which upon its completion in late 2016 will deliver 40,000 square metres of exhibition space, a new convention centre, a new entertainment theatre and a 5,000 square metre event deck which will be used for entertainment and product launches associated with convention events and will showcase the city’s city and harbour views.

Set to be completed over two years, the $1 billion project is expected to generate 3,700 employment opportunities during construction, including a peak workforce of 1,200 and opportunities for at least 50 apprentices on site.

It will be built by Lend Lease, which is part of the Darling Harbour Live consortium that also includes AEG Ogden, Spotless and Capella Capital.

Baird welcomed commencement of the project, which is part of a broader $2.5 billion makeover of Darling Harbour by the consortium. The makeover will also include a new hotel, urban neighbourhood and new public space.

He says the new precinct alone would generate $5 billion in economic benefits over the next 25 years, while the combination of the Darling Harbour remake, the $6 billion Barangaroo redevelopment, the $1.6 billion Sydney Light Rail program and the pedestrian precinct at The Goods Line will transform the city’s western flank and international image.

“Today marks the start of construction on the largest fully-integrated convention and exhibition facilities in Australia, and over the next two years an intensive construction schedule will be undertaken to deliver the project by the end of 2016,” Baird said. “The site will be swarming with excavators and bulldozers and up to 12 cranes will dot the city skyline as work swings into full gear.”

In order to preserve the site’s historic significance, the two ministers said a time capsule containing artefacts and information about the history of Darling Harbour would be buried on site.

Stoner said paying respect to the area’s history was important, from its indigenous heritage and early colonial years including industrial use as a goods yard, railway node and port through to its revival as an events and entertainment destination.

He says the harbour has always been a place for people and a centre of innovation.

“As we herald in the next chapter in Darling Harbour’s story, we have been mindful to keep the history of the precinct’s continual evolution alive for future generations by dedicating a time capsule,” Stoner said.

“The $2.5 billion Darling Harbour Live redevelopment will build on that legacy with state of the art major events venues, a new city neighbourhood, as well as new open public spaces, water features and improved pedestrian connections into this much loved part of Sydney.”