Bendigo city centre infrastructure could struggle to meet the demands of the type of multi-storey development council is trying to encourage.
A city planner and a developer have said the city's power and water supply stations would not meet the demand required for supply to the proposed developments.
Developer Scott Jackman said the costs required to compensate for this were prohibitive to development.
Mr Jackman was forced to adjust the design of two of his new buildings on Wills Street and on Mitchell and Mollison streets.
It added five and 10 per cent to the costs respectively.
Mr Jackman said water and electricity supply were the fundamental issues for development. Meeting the mismatch between supply and prospective demand meant the cost of building could be prohibitive.
If he was forced to include fixed infrastructure - such as power substations or water tanks - it would take up land that could otherwise be used in the development itself.
He said this increase of cost and loss of developable area meant the projects could become non-viable.
"It's a serious impediment to be able to deliver the built-form that the city's calling for in their strategies," he said.
"Is it prohibitive? I would say evidence suggests it is."
City of Greater Bendigo senior strategic planner Philip De Araugo said Bendigo's city centre, where the council was aiming to have four or five storey developments built, was most affected by growth.
"Our current infrastructure just doesn't quite support that which adds cost to the development and essentially cost to the end price of the purchaser," Mr DeAraugo said.
"Because of the scale of development that we want it means that they're not big enough that you build new sub stations... but they're too big to just tap into the existing services."
The city's 2005 CBD plan committed to encouraging residential development as part of reinforcing the area as a centre of activity for Bendigo.
Mr DeAraugo described the situation as "a bit of a catch-22" because the city needed to work with service authorities to figure out where to target upgrades.
He said it was best to take a precinct-based approach to the provision of these services. If new substations were built on an ad hoc basis, it would mean there would be substations outside every building.
At the moment all the costs of compensating for the increased demand went on to the development sector, which meant projects became unviable, Mr DeAraugo said.
"It is adding significant cost to developments, or proposals, which is meaning that some of them aren't actually being built. So we're missing out on development," Mr DeAraugo said.
"They've got to incorporate electricity substations, firefighting tanks and boosters, and essentially water pressure boosters."
The city is addressing these issues as part of a review of the 2005 CBD Plan. It will present a draft Bendigo City Centre Plan to council in about July, which will then be released for community comment.
Mr Jackman said the state government needed to partner with Regional Development Victoria and local government to support upgrades, as part of its plans to support develop in regional areas, taking the pressure off Melbourne.
For Mr Jackman's Mitchell Street development he was forced to "over-engineer" the fire resistance of the building to secure a dispensation from the CFA for the lower water pressure.
He said it was not Coliban Water's fault, but that no one seemed to have an answer to the impediments to development the infrastructure mismatch created.
Coliban Water's manager of regional livability Steve Healy said that the organisation worked with developers to help them meet buildings' firefighting requirements.
Buildings of four or five stories often need additional pressure from dedicated pumps or tanks within the building, Mr Healy said.
For his Wills Street development Mr Jackman negotiated an exemption to putting in a pump, but can see he will need a power substation, he said.
A Powercor spokesperson said the electricity infrastructure to supply Bendigo could support growth in the area.
"If an upgrade to the local network was required, it would be the responsibility of the developer to pay for this," the spokesperson said.
"We work with customers, developers and local councils to ensure we get the least-cost technical-acceptable option."
Have you signed up to the Bendigo Advertiser's daily newsletter and breaking news emails? You can register below and make sure you are up to date with everything that's happening in central Victoria.