Hopley Demolition has begun clearing out the building, following the removal of asbestos from the site. 

The Riverside Group, which owns the site, will restore the former pie factory.

City of Greater Bendigo's place manager Phil DeAraugo said the council was happy to see work get started. 

"The community has been frustrated but there wasn't much we could do to get the work started earlier," he said. 

"Lots of damage has been done to the building, with plaster board thrown around and asbestos being broken and the CFA was concerned about fires being lit.

"But once this is cleared out, the site will be secure. We don't want to be left with a vacant site for too long so hopefully it'll keep moving."

House prices in Bendigo and growing demand for inner-city living spurred on the decision to develop the site.

It is expected a planning permit will be submitted to the council early next year.

"Because we've waited a bit longer we've made sure we've got things right," Mr DeAraugo said.

Planning and development director Prue Mansfield said once the factory had been cleared, surveyors would take a detailed look at the red brick building.

“The survey will enable architects to come up with some fantastic designs to convert the existing building and add a new building at the rear of the site to make way for inner-city apartments,” Ms Mansfield said.

“The factory’s open spaces contained within the shell of the building lend themselves to being reused and adapted into something unique that still preserves a piece of Bendigo’s history.

“This is the sort of development the city’s planning controls are hoping to facilitate and bring old buildings back to life with a modern and useful twist.”

The main Gillies buildings were built between the 1920s and 1940s.

The Riverside Group has been working with Bendigo’s E+ Architecture on redevelopment of the site.