WARNERS Bay must change to survive, the town's chamber of commerce president David Naylor says.
A range of decaying regional towns in NSW and Australia were "prime examples of what happens if we don't do anything", he said.
"Within a period of years, it might mean we don't have banks, accounting offices, a supermarket and fashion boutiques."
Despite community concern about the town being redeveloped, Mr Naylor said people recognise "if we don't do anything we get left behind".
"Toronto, Belmont, Charlestown, Sydney, Parramatta, Gold Coast, Rio De Janeiro develops - everywhere in the world develops," he said. "We do that to enhance our lifestyle."
As previously reported, Lake Macquarie City Council has proposed to increase building heights in Warners Bay town centre, including five and six-storey buildings.
The council created a planning framework for the town centre, comprising "good quality buildings", active streets, business growth, along with community and cultural activities.
A council consultant's report said the town's buildings and public realm were poor.
"Settings that encourage higher quality buildings need to be an important part of the strategy for the centre," the report said.
"Development capacity will be a key motivation for the private sector to invest."
Mr Naylor said he understood concern about development because "human beings are wary about change".
But he said the council had listened to concerns and done "extensive consultation" with in-house staff and "consultants with different perspectives."
"I know the council cops a heap of flak, but I can only speak with a fair amount of pride about the way they've approached this," he said.
The council is planning for six storeys on a site it part owns - the town's main car park in John Street, behind the shops on The Esplanade. Mr Naylor said the plan caused "quite a fair bit of angst" a couple of years ago.
He said the council's plans had "architectural scope" to improve the town's appearance.
Residents also wanted to keep the town's "village feel".