The old Les Mills gym building on Victoria St will be demolished to make room for a new "Barton St Lane" retail development.
Foster Construction, which owns the building at 611 Victoria St, has secured a demolition consent and hopes to begin work in June.
"We're looking to develop a complex. A retail and office block," said commercial manager Leonard Gardner.
The three-storey proposed development includes 1000 square metres of retail space on the ground floor, about 50 carparks on top of that, and 1500sqm of office space on the top floor.
The building is being developed by Foster Development - part of Foster Construction Group - and a number of private partners.
Gardner said developing a retail lane will bring foot traffic through from the popular retail area on Barton St.
"We're trying to do an extension of Barton St as opposed to an extension of Victoria St."
It will create a new corner site on Victoria St with good visibility to traffic, he said. Foster Development is negotiating with potential retail tenants.
"A couple of retail and service providers have expressed interest."
The lane will be half-covered by the overhanging carpark and office floors.
Gardner said the company is working closely with Hamilton City Council to develop "the right solution for the city".
"We're trying to convert old stock into new building stock to try and rejuvenate the CBD."
Gardner said the building has been hard to tenant, partly because of antisocial behaviour of people who gather on Victoria St and in the existing walking tunnel to Barton St.
The building is close to Rota On Victoria which until recently sold synthetic drugs, causing nearby retailers to complain about intoxicated people loitering in the area.
Gardner said the new lane will become a space people can enjoy and feel safe in.
He said the decision to demolish the building was made easier because a recent inspection found that some holes in the concrete were caused by damage to the reinforcing steel.
"It's not about to fall down," he said. "[But] it has limited longevity."