The almost 4000 square metre block, on the corner off Aspinall Street and Negus Crescent, was sold to Platinum Construction for $2.57 million.

It was one of two blocks offered and sold at the Land Development Agency auction.

The local shopping centre at Banks is also set for an expansion following the owner's purchase of the vacant block next to it.

The 2500 square metre site on Pockett Avenue was bought for $475,000.

Banks shops owner John Costa said he and co-owner Henry Lau had wanted to purchase the block for about a decade and were pleased the ACT government had finally released the land onto the market.

The purpose clause for the site allows for a mixed use of commercial and residential properties.

Mr Costa said he had not worked out exactly what to use the site for but it would probably contain a number of shops and residences targeted at the elderly housing market.

He said they had an interest in attracting a discount chemist to the new site but "we have many things to think about''.

Mr Costa said another option would be relocating a couple of shops across to the new development on the block and expanding the existing supermarket.

He said customers and people who lived near the centre would be pleased there would be something built on the dusty block.

Mr Costa and Mr Lau bought the block with two other business partners, Peter Martihiello and Dimitry Spasov.

Independent Property Group sales agent Wayne Harriden said both sales showed there was a strong market for small blocks in established areas in Canberra.

He said there had been considerable interest in the Watson site.