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Pinch of Spice owner Manish Singh said he was struggling to find a suitable alternative location within the CBD and to cover the high costs associated with the move.
It would cost at least $150,000 to set up the restaurant in a new location, he said.
HWCP Management Ltd plans to build a covered complex for retail, entertainment and hospitality, encompassing the block bordered by Dee, Tay, Kelvin and Esk Sts.
Demolition was expected to begin in January.
Mr Singh said he had asked HWCP to assist with the move.
"HWCP is asking us to leave, so it is their responsibility to give us a place to move to.
"If you want me to leave, find a location for me or pay out my lease and I’ll find my own place.”
Mr Singh said he had been offered an alternative location, but it was on the outskirts of the CBD in an earthquake-prone building, which he would likely be forced to move out of in the future.
He also wanted the restaurant to be located in the city centre, he said.
After being informed HWCP declined to pay out his existing lease, and he realised the hefty costs associated with moving premises, Mr Singh said he had had to pull out of a business venture in Picton, which had cost him $25,000 to $30,000, and he was now in financial difficulty.
"We are going neck-to-neck. I stopped taking a salary from this month.”
Closing the restaurant was not an option because four families relied on his business, Mr Singh said.
Invercargill City Council city centre co-ordinator Kari Graber said there were few premises in the CBD suitable for restaurants.
Also, the costs associated with opening a restaurant were "astronomical” and triggered a raft of consents to bring the facilities up to code, particularly if the building did not previously have kitchen facilities, she said.
"There was the potential existing restaurants could go out of business.
"The council may need to offer the businesses some incentives,” she said.
Kim’s Sushi manager Sweta James agreed there were not many suitable alternative locations for her business in the city centre.
"We don’t want to go outside the CBD. We want to stay near Tay St. The majority of our customers are office workers,” she said.
Zookeepers Cafe owner Paul Clark said plans were under way for the cafe to move, but he could not say when or where.
He said negotiations with HWCP had not started yet.
"I’ve got to go somewhere in the meantime, but I want to hear back from [HWCP] about what they can do to help me.”
Ray White Real Estate licensee commercial and residential salesman Andrew Moreton said at present there were a nominal amount of buildings available in the CBD, if any, to lease with suitable commercial kitchen facilities.
Most potential sites would require a significant refit including installing commercial kitchens, he said.
It would also be difficult for an established cafe to replicate the existing embedded ambience in a new location, he said.
"That’s not just solely about recreating the existing interior physical layout, but the retention of existing customers and the general heart and soul of the business. It will be more than just finding another site. It needs to be the right site.”
However, sometimes a change in location could reinvigorate a business and provide opportunities to attract new customers, Mr Moreton said.
HWCP director Scott O’Donnell acknowledged relocating the restaurants would be difficult.
"The food outlets are probably our biggest challenge because the cost of moving is so high, because of kitchen needs. Whereas a retailer, we can rip a rack off the wall and get them going next Thursday.”
HWCP was dealing with all the tenants in the block on a case-by-case basis, he said.
"We are trying our best to be fair to all while still ensuring we can create a better future for Invercargill.”