The Victorian Civil and Administrative Tribunal has knocked back the 7-Eleven earmarked for the corner of Bridge Street and Arnold Street.

"It represents an unacceptable outcome as far as the planning scheme is concerned," VCAT member Christopher Harty said.

Developers took the City of Greater Bendigo to the tribunal because of council opposition to their permit application.

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The developers argued that the site was a good place for a service station and second shop front for a business still to be determined.

They said it was at the corner of two arterial roads with links both to Bendigo's hospital precinct and its north-western suburbs.

The site is zoned for commercial use and a range of Victorian government policies support businesses like it in the area, developers had said.

"They say the proposal will provide a viable service for the needs of both local residents and workers who either work locally in the health precinct or commute between the Bendigo CBD and the outer residential areas to the north," Mr Harty said.

He said that while the argument "appears logical", specific council policies for the area because it connects the city centre to the hospital precinct.

The council's policies include pushes for more inner city living and businesses that support that.

Those policies include ideas to make Bridge Street into a "main street" that supports people living and working nearby.

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The council told VCAT that a service station would be an underdevelopment of the site and would not set a benchmark for any other developers eyeing the area.

Service station developers countered that Bendigo's inner city living market was immature and that nearby sites would make more sense for apartments in the future.

They said the site was so close to the city centre that it was unlikely to attract big commercial or office builds, so smaller developments like the service station were more likely.

Mr Harty disagreed, pointing to council policies that could drive up the number of pedestrians on Bridge Street.

Any concerns about the apartment market being immature should not deter developers given how close the site was to the hospital and the council's hopes for Bridge Street's future, he said.

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