The Valmorbida family, which has owned the 130-year-old business since 1955, has unveiled new plans, including six new hospitality spaces and two offices.

The family's third generation, Jamie Valmorbida and cousin Luca Sbardella, are in charge of the project on the corner of Lygon and Faraday streets.

Construction has started and the project, with spaces ranging between 50 and 300 square metres, is expected to be completed late this year.

The revamped building will have a deli and espresso coffee bar in the corner shop; a wine bar in the former bottle shop; a restaurant next door where Johnny's Green Room used to be; a rooftop bar; and a cellar and basement bar. The Pidapipo gelateria, run by Jamie and his sister Lisa Valmorbida on Lygon Street, has been operating since 2014.

"We will be activating the entire perimeter of the building," Mr Valmorbida said.

The hospitality offering will be a combination of leased entities and family operated businesses with Cushman & Wakefield retail specialist Ben Tremellen fielding inquiries.

However, the spaces are hitting the market at a time when there are already six empty restaurants on the strip.

Mr Valmorbida confidently pointed to the success of Brunetti's and Heartattack & Vine at the northern end of Lygon Street, where new and revamped hospitality has thrived compared with the old Lygon Street Italian offering.

"For us it goes in cycles. There's an old Carlton and a new Carlton It's improving by the day," he said.

Kelly & Shiel agent Damien Shiel, who has worked on Lygon Street for more than 30 years, said retail was difficult everywhere but the strip had been hit hard.

"The main factor is the city is going gangbusters and it's taken a bit out of Lygon Street," Mr Shiel said.

The shifting of the Royal Women's Hospital from the corner of Grattan and Swanston streets to the other side of the University of Melbourne has not helped, taking away a big source of customers among its workers, patients and visitors.

"But everything goes in cycles and I'm confident Lygon Street will bounce back. The demographics are good," Mr Shiel said.

"Landlords are willing to meet the market with rents and incentives but they want a quality tenant."

Colliers International agent Matt Cosgrave is handling expressions of interest proposals for the 1000 square metres of office space upstairs.

"The Carlton market is dominated by Melbourne University, RMIT University and unions but this will suit co-working, start-up and entrepreneurial businesses," Mr Cosgrave said.

Carlton's vacancy rate is around 3.5 per cent and rents average in the high $200s to mid-$300s.

"But with the quality of this project we are pitching at $460 a square metre," he said.