In a Melbourne first, Stonnington Council is pushing for a "vertical zoning" system in its proposed Chapel Street Activity Centre which includes Forrest Hill, South Yarra, Prahran and Windsor precincts.

If adopted, the zone would force developers to retain the ground, first and second floors for retail and commercial use only. Any residential development on the lower floors would need a permit. However, the second floor could be used for residential purposes if the building was on a side street.

SGS Economic and Planning senior consultant Yilong Shi, whose firm advised the council on the issue, said the amendment would address the council's concerns regarding "loss of employment".

"In order to protect employment, jobs and businesses in the local area in Chapel Street, this amendment is focused around giving council some control," Mr Shi said.

The amendment had received a lot of attention, with other inner-city councils showing interest in the proposed changes.

Property group Knight Frank's research director, Richard Jenkins, said data from August last year showed that Chapel Street and Toorak Road retail vacancy rates were the highest in 10 years. Mr Jenkins said new figures due next month were expected to be around the same mark.

"We monitor 11 shopping strips across Melbourne ... our research shows that in August 2014, vacancy for Chapel Street retail strip was 8.4 per cent and Toorak Road was 7.7 per cent," he said. The current vacancy rate for the CBD was 3.2 per cent.

But, he said, the proposed changes sounded "promising in theory", especially if they could deliver a balance between residential, retail and commercial use. 

"You want planning schemes to help guide into making precincts liveable but it's very hard to control market forces," Mr Jenkins said.

"If it is an obsolete retail position, just because it's been locked as a retail use that may not be for the best purposes."

Stonnington Mayor Melina Sehr said vertical zones were good news for retailers and commercial operators.

"Maintaining a concentration of business uses in the Chapel Street Activity Centre will support it to continue to be a viable place to do business,"  Ms Sehr said.  Existing developments would not be affected by the change unless they applied for a development permit.

Welcoming the move, Chapel Street Precinct Association executive officer Oskar Cebergs said they supported any proposal that encouraged employment.

"We are a principal activity  centre (which) encourages the development of an urban village where people can live, work, play. The success of that is a diverse usage mix," Mr Cebergs said.

"If nurtured this will really resolve in increased productivity, an increase in foot traffic and tourism ... and really for the future it is going to provide a greater economic resilience."

Mr Cebergs said the association's own figures showed a healthy vacancy rate for Chapel Street.

Stonnington Council will consider a report on the amendment at its public meeting on  August 17.