The project would see the restoration of the run-down building beside Irmo St, creating a more open space of up to 5000sq m for a mix of retailers.
The complex will be developed by Irmo Properties Ltd, which owns land and buildings in the area, if the council's hearings committee grants resource consent for a retail area on land zoned for light industrial use.
The proposal has already prompted opposition. Residents and business owners are worried the new addition, north of the existing Green Island retail area, would split the community in two.
Resident Graham Roper said he feared the complex would eventually be revealed as a supermarket that would poach customers from existing retailers.
When contacted, Irmo director Grant Chirnside, of Dunedin, said an application for resource consent would be filed by early next month, but it was too soon to say exactly what shape the development would take.
No tenants had yet been confirmed and, while he could not rule out a supermarket, the intention was for a mix of smaller and larger retailers.
That would depend on whether consent was granted and, if it was, whether the site's use was restricted to a smaller number of larger retailers, or a more flexible mixture of retail spaces, he said.
The existing building would need extensive work to be refurbished for retail use, while an older and near-derelict cottage-sized building on the site - believed to date from the 1880s - would be demolished, he said.
He said it was hoped to be able to use the existing building and space rather than knocking it down and starting afresh.
Mr Chirnside - whose company developed the Fresh Choice Roslyn supermarket - said the size of the retail space would be significant and the development would have to draw shoppers from other parts of the city to Green Island.
"I can really only see that being a positive for Green Island."
Mr Roper said he had spoken to at least 20 residents and business owners opposed to the development, who feared it would destroy a developing community of small retailers by splitting the area into two competing retail zones.
He pointed to the loss of smaller stores in South Dunedin and Roslyn as examples of the likely effect when larger developments arrived.
Mr Chirnside said he believed the company's Fresh Choice Roslyn supermarket had helped breathe new life into the area.
Mr Roper also doubted the condition of the building would allow refurbishment, predicting it would eventually be demolished and replaced by a supermarket.
He was concerned neighbours had received letters and plans from the developer, inviting them to return consent forms supporting the development based on limited information, which would rule them out of submitting against the proposal later.
He believed the proposed development should be discussed by the community at an earlier stage, in line with Mayor Dave Cull's recently signalled desire for changes to the council's consultation process.
Mr Chirnside said the addition of non-competing retailers in Green Island would be a good thing, bringing more shoppers into the area.
When contacted, Green Island Business Association president John Moyle said the association was reserving judgement until more information was available, but agreed the wrong sort of development could split the main street in two.
Irmo St development
• Proposed retail complex put to neighbours; resource consent still required.
• Application to Dunedin City Council expected by next month.
• Space for about six retailers in 5000sq m refurbished iron roller mill building.
• No tenants confirmed; supermarket not planned, but not ruled out.
• Neighbours and business association fear development could hurt existing businesses.
