Paspaley Pearls has received approval to convert a State heritage-listed former electricity substation on Murray Street into a new luxury jewellery showroom.

The No. 2 Substation, between William and King streets, was constructed by Perth City Council in conjunction with the State Government's East Perth Power Station in 1916. It was decommissioned in the 1980s and stripped of its equipment.

The building is included on the State Register of Heritage Places and the City of Perth's Planning Scheme No. 2 Heritage List, and forms part of the King Street Heritage Area.

Plans for the showroom include removing a J & E Ledger cast-iron spiral staircase as part of Paspaley's fitout. The Metro Inner Development Assessment Panel unanimously approved the $6.5 million development at its February meeting after an earlier conditional approval from June was revised.

Panel members considered the proposal a good use of the heritage building, with City of Perth councillor Raj Doshi describing it as a balanced approach to bringing the place back into use while retaining its heritage significance.

City planning officer Amie Groom said the building had remained vacant for a significant period and its purchase by Paspaley would allow it to become publicly accessible. She said the building would probably otherwise have remained vacant for many years.

The Department of Planning, Lands and Heritage said the proposed external demolition was greater than previously supported, but would improve the building's usability.