The Dendy Adult Cinema and Club X in the heart of Chinatown has closed after its co-owner, porn mogul Joseph Sobota, decided to sell the three-storey building.

Mr Sobota, a former brothel owner and co-founder of Australia's longest-running adult consumer exhibition SEXPO, jointly owns the property at 1-3 Coverlid Place with another party.

The Dendy Adult Cinema was first established in the 1970s on Collins Street before taking over a small cinema space in the more discreetly located, back alley behind.

The Club X sex shop in the Coverlid building will be relocated to Elizabeth Street where Mr Sobota operates another adult business.

Melbourne's adult cinemas have long faced public and council-led opposition, even prior to being swamped by the internet.

Another adult cinema operated by Mr Sobota, Shaft Cinema and Club X sex shop on Swanston near Lonsdale street, faced concerted opposition from the City of Melbourne before closing.

CBRE's Paul Tzamalis, appointed to handle the Coverlid sale, said the building was expected to fetch around $2.8 million.

"It's hard to put a value on a laneway property because everyone's view is different," he said.

Melbourne's laneways are noted for attracting small business owners willing to gazump returns-focused investors by paying a premium for standalone buildings that can be converted into funky, boutique offices.

Upmarket restaurateurs and bars have also adopted the city's laneways.

The last freehold property to sell in the Chinatown precinct under $5 million was 105 Little Bourke Street, which was sold by CBRE for $4.348 million in 2014, Mr Tzamalis said.

Chinatown has become a favourite of Asian property investors and one of the city's most tightly held property pockets.

The property last traded for $560,000 in July 1997, property records show.