The Mareel centre is earmarked for a site in North Ness in Lerwick, Shetland though work is scheduled to start in July, the project still has hurdles to pass.
The Health and Safety Executive has opposed the development on the basis a nearby fuel-storage site is too close, submitting a formal objection to the Shetland Islands Council.
If the project gets the go-ahead the centre will have a performance auditorium, a 170-seat cinema a teaching room, rehearsal space, recording studio, cafe and offices among other facilities.
The council will make a decision next month on the project, which is due to be finished early in 2010.
Shetland Arts earlier this week won £2.12 million for the Mareel development from the Scottish Arts Council and secured other private funds after a long-runnin campaign.