However, Featherston ward candidate Tim Watson has rubbished the idea.
"I believe strongly that scarce and prime public land should not be sold off," he said.
Mr Watson said Mr Montgomerie had a conflict of interest because of his job.
In response, Mr Montgomerie said he was not trying to profit from the situation.
"I agree with Mr Watson that if the council were to sell or lease the land, it would be entirely inappropriate for me to be involved with that transaction," he said.
Mr Montgomerie said he had been approached by people looking to establish shops in the centre of the town and this was the basis of his suggestion.
"What I see is the potential to provide jobs for local people, use the funds from the sale of the land to transform existing parks, and thereby reduce the burden on ratepayers."
South Wairarapa mayor Adrienne Staples said the land would be administered under the Reserves Act and couldn't be used commercially.
But Mr Montgomerie said a reserve status could be revoked by the government through public submissions.
"From the response I have had so far, I believe there could be significant community support for this.
"I believe the likelihood that it could be made available for commercial use to be significantly higher than the mayor's estimation of "very unlikely"."
Featherston ward candidate Colin Olds said he agreed with Mr Montgomerie as a town centre would cost ratepayers money.
"A commercial development such as a shopping complex or factory outlet store could create real jobs and generate revenue back to council by way of rates," he said.
"I am sure that if a public poll was to be held, with all the facts on the table, our community would vote for job creation and commercial development."
Helen Barrow, standing for Featherston council, said was open to ideas on what the vacant land could be used for.
"We still need to ensure that the focus of the overall goal is not lost - our community supermarket.
"I am open to the idea of a potential lease agreement, as long as it will provide support to on going projects. "
She also believed council should focus on preserving parks and historic buildings in Featherston.
Dean Davies, Featherston ward incumbent and candidate, said the land swap was a good idea and it should be kept for the public.
"I don't believe in selling off the family silver."
Fellow councillor Solitaire Robertson, who is running for Featherston again, said any suggestion of lease or sale was premature at this stage.
There is a significant legislative process to go through first, she said.
The mayor said rates would not increase to create a town square.
"If the town supported the concept, it is proposed to apply for grant funding and use the council's reserve funds," said Mrs Staples.
She said a new hard surface area would have little or no impact on the council's maintenance contracts.
