Converting the decommissioned Higgins Oval into a community park with the possible addition of recreational equipment such as an outdoor gym, playground or basketball court had been considered alongside the redevelopment of the former Higgins School.

But the plan, to create a smaller version of park in Crace, would have been funded by selling off more than half the land for housing and most residents and shop owners objected.

The oval will now be retained as is and Labor backbencher Yvette Berry hailed it as a win for residents.

New development on the school site, closed in 2008, will be restricted to community facilities such as a retirement village, aged care accommodation, supportive housing or childcare facility - services sorely needed in the suburb, Ms Berry said.

She said the community supported the school site's redevelopment, but wanted the oval preserved as open space.

"It was a really sensible compromise by the community," she said.

"I wasn't sure what people wanted, that's why we held meetings and knocked on doors.

"It's a large green open space where people walk their dogs, fly a kite, have a view of… it's already well used by the community."

She denied the backflip was an attempt to appease Belconnen residents feeling abandoned by government initiatives in other parts of Canberra such as light rail.

"This was a very localised issue," she said.

"It was a different development to new development somewhere else, it was a very large piece of community space that was going to be taken up all in one go.

"When the schools were closed the ACT government made a commitment to the community that those sites would be set aside for community use or community services… they're sticking to that."

Ms Berry said the emotional attachment residents had with the school was part of the reason why most wanted the oval retained.

The sell-off for housing was suggested as a way of using existing land rather than spreading out further for new housing, but Ms Berry said it had never been factored into future land releases.

Despite the restrictions on the school site's development, Ms Berry was confident the government would attract interest from investors and developers keen to set up community facilities at the site.

"I think everyone in the community as well as aged care and early childhood providers knows there's a need for those services in Canberra," she said.

The Land Development Agency will engage a civil contractor to demolish the school buildings, with the site expected to be released to the market by the first half of 2016.

Deputy chief minister Andrew Barr said the government was working closely with tenants who remained in the existing buildings on the school site to minimise disruption during their relocation.

Ms Berry said the community would continue to be consulted as the redevelopment of the school progresses and a community hall may be considered.