The building is boarded up, but one councillor says any loss of retail space has "consequences".
The empty shop is one of five in Wakefield due to be knocked down to clear space for new housing.
Those behind The Market Gallery say they hope to add to South Shields town centre's regeneration.
Artists say making use of the space is "vital" given the number of empty buildings in Sheffield.
The Nottinghamshire-headquartered firm disappeared from the high street two years ago.
A games arcade and new flats are approved for the building, and plans are submitted for next door nightclub.
The building which housed the Wilko store closed in 2023 when the high street chain went bust.
The unit has been empty since October after the retailer's collapse.
Residents are enthusiastic over plans for a redundant branch of Wilko to be turned into a construction college.
