It has stood quietly near the bottom of a valley in La Trobe Street for 150 years, as the city has transformed around it.

Now, in what some experts say is the most shameful heritage failure in years, a former horse coach salesroom built in 1862 will fall under the wrecker's ball – replaced by a small shopping plaza leading to a laneway.

Tristan Davies, president of Melbourne Heritage Action, in front of the former coach factory to be demolished to make way for a laneway below a ubiquitous tower. Credit:Chris Hopkins

Once the ornate Italianite-style shopfront is torn down, and the Edwardian building next to it goes too, hundreds of tiny 17-square-metre student apartments will replace it, in a tower approved by Melbourne City Council last week.

"They are replacing it with a half-arsed laneway and entry. It could easily be kept," said Tristan Davies, president of Melbourne Heritage Action.