The chamber recently used the upper floors of a building in the Quadrant Mall to test the viability of changing 300 square metres of space into three apartments.

It found that a $1 million expected cost for the transformation could not be matched by a return due to a soft real estate market.

Chamber executive officer Maree Tetlow said the study uncovered several obstacles concerning the inflexibility of the National Building Code, particularly for heritage-listed buildings in Launceston.

She said the project would have required a passenger lift, estimated at $45,000, which was not just problematic in terms of cost but space within heritage buildings that were notoriously hard to retrofit.

Ms Tetlow said the chamber had recommended a re-examination of the building code, and amendments to the council planning scheme for permitted use for inner city buildings so as to reduce time and cost associated with approval for new residences.

She said the chamber recommended that state and local government review and reduce consultancy reports required for developments.

The Launceston City Council has plans in the Greater Launceston Plan, and its planning scheme, to encourage more people to develop and live in central business district residences.

Council general manager Robert Dobrzynski said the council would join the chamber to lobby other levels of government for regulatory change if needed.

``What we are keen to do is disseminate out of the report significant impediments that discourage people from developing what are grossly underutilised spaces in order to add to the vibrancy of the CBD through residential accommodation,'' he said.

``There will be things that we need to do to reduce red tape.''