The project, which is set to create between eight and 10 jobs, is being hailed as an important addition to Orkney’s diverse range of tourist attractions, ahead of a predicted major increase in visitor numbers to the islands.
Orkney Distilling Ltd was formed early last year by local couple Stephen and Aly Kemp, with the firm’s first gin, Kirkjuvagr, proving a huge success.
Full production of Kirkjuvagr, which is now being sold throughout the country, will move to the new Kirkwall seafront distillery once operational.
The company also has plans for further product lines, which it will reveal later this year.
Stephen Kemp, managing director of Orkney Distilling Ltd, said: “After months of planning, we’re really excited to see the project now underway.
"The first stage involves the careful removal of the existing dilapidated warehouse buildings on the Ayre Road site and, once cleared, we’ll be getting straight onto the foundation concrete pour for the new distillery and visitor centre.
"Our aim is to have the project completed by the end of August, with our focus then on training our new staff and gradually moving full production of Kirkjuvagr to Ayre Road.”
He added: “It’s always been our intention to create a project that both the local community and Orkney’s many visitors can enjoy.
"With a major increase in tourist numbers predicted for this year, along with a rise in cruise ship visits, there’s a real need for more high quality attractions in the county to enhance the experience of those travelling to our islands.
"We’ll be working hard to ensure our new distillery and visitor centre becomes an essential stop on any Orkney tour, as well as a place local folk will also want to come and enjoy.”