Shops will be demolished and replaced by a two-storey plus mezzanine development for six ground-floor retailers, one possibly a restaurant, and offices above.

Parking has become a premium as people working at the Woden Town Centre, a major employment hub for public servants, use free parking at the shops and walk across an oval and down a path to their offices.

But planners say the shops, on the corner of Devonport and Launceston Streets, have sufficient parking and will not need more to accommodate increased traffic.

Time limits were introduced to deter public servants from all-day parking, but when enforced in 2011 traders and their customers were fined as well, causing an outcry.

Hairdresser Teresa Rolfe, who has battled parking officers and public servants from Woden Town Centre and Civic, predicts massive problems. ''We approach (public servants) nicely and say we would appreciate some thoughtfulness, and they just say 'we are not breaking the law'.

''I approached the government department and they said 'tough luck, park in the residential areas'.''

Mrs Rolfe has run her salon for 14 years and refuses to leave her corner position during the demolition because she has three years remaining on her lease.

Consultants Integral Service Group says a survey and analysis of parking in 2009 found significant unused public parking at and near the shops.

The report says parking demand will increase because of the commercial building and 11 residential units which have been developed at the back of the shops on the site of a service station, which has been closed for many years.

The unit developer is also applying for a lease variation to increase the number of units from 11 to 14.

Integral Service Group says parking demand and restrictions are a direct consequence of ACT government's parking supply and pricing policies in Woden Town Centre.

''They are not a consequence of Lyons development and therefore the additional parking should not have to be accommodated by existing or new businesses in Lyons.''

An analysis of existing and future parking concluded ample parking available to support commercial expansion, without the need for providing additional parking.

''The increased demand for off-site parking associated with this site will be small compared with the existing and future projected parking demand in the area.''

In 2011 a $1.1 million upgrade of the shopping centre included street furniture, landscaping, paving and public art, but no extra parking.

In recent years the local centre has lost a medical practice, a chemist and more recently a newsagency. A small supermarket, take-away shop, offices and hairdressers still trade there.

Meanwhile, work on the ACT government's $1.1 million upgrade of the Red Hill shops began on Tuesday.

Minister for Territory and Municipal Services Shane Rattenbury said the first stage of construction would be on the northern side of the shops in Discovery Park along La Perouse Street and Monaro Crescent.

"The second stage of construction will take place on the southern side of the shops and will be staged to allow continuous access to the shops,'' he said.

New paving, seating, street lighting, bins, garden beds and a drinking fountain will be installed at the shopping centre.