Demolition work has begun on a Great King St building that, for three decades, housed Scribes Second Hand Books.
Developer Tony Tan said he bought the building shortly after lockdown last year.
He got engineers in to assess the building, but what they found was disheartening.
"It was in really, really bad shape," he said.
Walls were slanted, wonky and cracking, and there were mushrooms "the size of your palm" growing inside.
In its place he was planning some central city accommodation.
A demolition consent application lodged with the Dunedin City Council shows plans for a new building containing 10 apartments, with a communal rooftop garden and a ground floor commercial premises.
Mr Tan said he was also hoping to include a heritage element to the project.
Scribes closed at the end of last year, after catering to Dunedin’s bookworms for 30 years.
Before Scribes set up shop, the building was home to a party flat known as "The Shambles".
It was featured in a book about well-known Dunedin student flats.
Demolition was expected to take about a week.