Hastings' oldest building will be gone by Christmas, to be replaced with a temporary shopping centre made with shipping containers.
The Albert Hotel owner, Michael Whittaker, said the timing was not right for full-scale development of the site because of the poor state of the commercial property market.
A permanent development was "still on the cards" but until then a two-level container development would spring up with up to 16 spaces for lease, modelled on Christchurch's successful Re:START container mall.
Yesterday the Hastings District Council agreed to create a green space on the site and maintain it for four years.
Hastings Mayor Lawrence Yule said it was "time to get the Albert down".
"The public opinion is that it's an eyesore and needs to be dealt with," he said.
"Years ago people were offering over $1.5 million for it and then the economy changed. Its structural integrity is very poor and everyone who has looked at it said there is nothing that could be done and it would have to come down."
Green spaces in the CBD were a council priority and a way to help the "very new, exciting concept for that end of town".
Mr Whittaker, also chairman of the Hastings City Business Association, said he was still committed to a long-term rejuvenation of the eastern side of the CBD.
"It will be very, very different for the Hastings CBD. While we can't change Hastings overnight, we can slowly start that transformation. This is the start."
A neighbouring building that housed the hotel's bottle store would remain "for now".
Property consultant Pat Turley said if the hotel could not be saved, then the development was "superior for Hastings".
"The proposal, with some suitable retail leasings and also well-considered green space, would generate vibrancy and benefit the locality, nearby retailers and other commercial uses at this end of town," he said.
"The transitional site use concept is great and it is very exciting for Hastings.
"The developer needs to be given full points for his initiative."
Councillor Sandra Hazlehurst, chair of the district development committee, said she hoped it would bring new people to the CBD.
She is no fan of the hotel, empty for four years on the corner of Karamu Rd and Heretaunga St East.
"I'll be there the day it comes down - there will be celebration. Just to have an empty space would be better than what we have now," she said.
"The container shops seem to work very well in Christchurch and Britomat. People enjoy a different style of visiting different businesses."
The Albert was built in 1882 by William Dennett, an Australian immigrant who became mayor of Hastings.
The two-storey wooden building was given category two protection by Heritage New Zealand because of its aesthetic, architectural, cultural and social values.
The protection ensured the facade remained intact but Mr Whittaker won an exemption, allowing demolition to proceed subject to a documentation/recording process as the ground it stands on is an archaeological site.
Hastings commercial property had longed struggled with over-capacity because of its elongated CBD, worsened by large-format stores outside the CBD and online retailing, he said.
"That is why we have to get people back into Hastings for these retailers to survive."
The council will soon consider an application from the business association to close two blocks of Heretaunga St East, including the hotel site, for a growers' market on Saturday mornings, starting on November 1.
Neighbouring buildings, including the former Winz premises on the opposite side of the street, have also been bought by Mr Whittaker for development.
Marketing of the container spaces will start on Monday.