A scarce supply of industrial land in Warragul and Drouin is putting future economic and job growth at risk.
An economic land use paper prepared for Baw Baw Shire has identified a critical need for more industrial space to support enterprise expansion and attract new enterprises.
The discussion paper, prepared by Charter Keck Cramer consultants, said land supply was extremely limited "precluding any meaningful industrial expansion" in the two towns.
"A lack of land to respond to demand is likely to result in higher land costs and entry costs for new enterprises and potential higher costs for consumers.
"A lack of available sites will eventually curtail choice and direct expenditure outside the municipality.
"Critically, if prolonged, a lack of land supply will see the shire miss economic and employment opportunities," the report stated.
The discussion paper identified key sites in Warragul and Drouin for commercial and industrial development and support job growth.
The report said there were a number of significant underutilised and redundant sites that needed to be activated for industrial and commercial development, including the former saleyards site and in the long term Logan Park that may provide future development opportunities.
In Warragul, key sites to grow the shire's retail, hospitality, household and service sectors include:
The former dairy factory site in Queen St;
Extension of the large format retail development in Queen St, west of Hazel Drv;
Vacant lot in Queen St, east of Napier St;
The former Warragul saleyards site; and,
Commercial development of housing sites along Mason and Albert Sts.
The report said the land use structure of the Drouin town centre precluded further retail and service expansion.
"Drouin will require a significant expansion of retail space to accommodate growth. The precinct has the potential to add a further 5.1 hectares to the shire's commercial land supply," the report stated.
Warragul currently includes 10 hectares of theoretically available industrial land. However, remaining larger sites in Warragul's industrial precincts are either subject to construction activity or subject to an approved planning permit.
Within the next two years, Warragul's industrial areas are likely to include no available larger sites to support industrial expansion.
Within the Drouin industrial precinct there is a single four hectare site available for development. All of Drouin's other larger sites are fully occupied.
The report suggested council could consider industrial land in Yarragon and Trafalgar to accommodate unmet demand.
Yarragon and Trafalgar has a combined total of 36 hectares vacant industrial land
The paper also identifies the need to establish a Longwarry special economic area - a strategically significant 99.5 hectare area at the intersection of Princes Hwy and Sand Rd.
Consultants said Longwarry could be identified as a long term strategic initiative, where the proposed saleyards development in Thornell Rd could be a significant anchor tenant.
"When Longwarry is ultimately delivered, the shire's existing heavy industry and noxious uses should be encouraged to relocate to Longwarry.
"Relocation will help remove heavy industry from the epicentre of the shire's population growth but will also assist in generating new industrial land supply within Drouin and Warragul for less intensive industrial uses," the report said.
The discussion paper is currently on public exhibition for community feedback.
A community drop-in session to ask questions and learn more about the economic land use strategy will be held on Friday.
The session will be held in the West Gippsland Arts Centre Fountain Room between 10am and 1.30pm.