James Richmark Pty Ltd and Zauner Construction Group have asked for the land on Forest Road next to Bloomfield Medical Centre to be rezoned from R1 residential to B2 local centre to allow for a 1649 square metre supermarket, a 416 square metre mini-major outlet and 845 square metres of specialty retail, with future stages to expand the space to equal the scale of North Orange Shopping Centre.

Zauner chief executive Garry Zauner believed south Orange would be ready for an IGA or a FoodWorks-type offering in the medium term as housing grew.

"It won't happen until the capacity's there, it's not going to challenge the retail precinct in town," he said.

The rezoning proposal came before Orange City Council on Tuesday night where councillors allowed it to progress to the state government.

The state government will decide whether it can progress through full assessment and public consultation.

At first, mayor Reg Kidd asked for the matter to be deferred, saying he needed more information.

"What we approved initially was minor retail activities including a convenience store, hairdresser, restaurant and takeaway food," he said.

"There's a big difference between a convenience store and a supermarket."

Cr Kidd was concerned the recently-upgraded intersection for the two hospitals on Forest Road would no longer be sufficient for the type of development on site.

However, his councillors were satisfied they would be able to consider the matter again before a rezoning became official.

Councillor Russell Turner said the development was needed.

"I would see it as a positive move towards developing south Orange and it would help [the Shiralee subdivision] move forward," he said.

Councillor Jeff Whitton said North Orange Shopping Centre was well-utilised.

"Has it had an impact on the CBD? I don't think it has," he said.

A report to councillors indicated the proposal could conflict with land zoned B2 near the Department of Primary Industries' research station, but council's retail consultant had supported a staged approach.

"Despite being rezoned some years ago, it is unclear whether the state government intends to ever take up the use of the site for its zoned purposes," it said.

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