Melbourne's first transsexual brothel, the Pleasure Dome, is on the market.

Once discreetly tucked away in a light industrial neighbourhood in South Melbourne, the six-bedroom establishment on Gladstone Street is being rapidly encroached upon by residential development.

In fact the parlour will eventually look over a park, opposite a new primary school, according to state government plans for the multi-billion Fishermans Bend urban renewal project.

It is a pairing that sits uncomfortably even with Pleasure Dome owner Ivan Gneil. "It sounds very strange, but I would be most happy if it was sold to be closed down. I don't really want a brothel near a primary school. I don't want that to be my legacy."

Since the late 1990s, when the brothel opened, it has specialised in transsexual services, charging up to $300 an hour.

Mr Gneil first began operating a transsexual escort agency in an era when he said there were very few career options for men who became women.

"If you left work on Friday as John and wanted to come back on Monday as Josephine, they wouldn't hold your job for you, you would be fired," he said.

"All transsexuals in those days worked in the sex industry, because it enabled them to make a large amount of money to get their Adam's apple shaved, get their breasts, get their cheek implants or buy an entire new wardrobe of shoes and clothes that they required."

In recent years, the Pleasure Dome has come to wider attention in Melbourne due to the gruesome murder involving its former employees Marcus Volke and Mayang Prasetyo. In 2014 Volke reportedly killed dismembered Prasetyo, a transsexual sex worker, before boiling her body parts in their apartment.

"It's terrible," Mr Gneil said, who is retiring as a brothel "madam".

He laments the loss of a more glamorous era, where he was often invited to model and celebrity parties.

"There's so much drugs and ice in the industry, it's not something that I personally want to be associated with anymore."

Recent land rezoning in the South Melbourne area will allow the Pleasure Dome to be redeveloped into apartments up to eight-storeys tall.

Real estate agent Simon Regan said he had also been contacted by people wishing to renovate the warehouse block into offices or an art gallery.

"It seems like the notoriety is more an allure," he said.

Inspections of the brothel are made via appointment only and the 211 square metre property, which boasts introduction rooms, will be sold via expressions of interest. "We're expecting it to go for a more than a million," Mr Regan said.

The state government has been approached to buy the site but declined.

Mr Gneil said it would be a shame if that decision saw the business continue as a brothel.

"I'm not going to be really fussy on who I sell it to or know who I sell it too. And the last thing they really want is a bikie gang operating a brothel across the road from their new park with school children in it," he said.