The sale will open the way for more parking spaces and re-release of another big development site nearby, where the Land Development Agency had proposed a 28-storey ''vertical village'' last year.

Jones Lang LaSalle sold the 8258-square-metre site under the hammer on Tuesday morning, when bidding started at $2 million and rose in $100,000 and $150,000 increments.

Demac owner Tony DeMarco will be be required to build car parking for 850 cars on the site now occupied by 226 parking spaces. It is flanked by the Tradies Club and the nine-storey Aviation House.

Demand for parking at Woden Town Centre is the highest of all town centres, according to Territory and Municipal Services.

Mr DeMarco developed the Jamison Centre in Macquarie, owns a gymnasium and development site in Irving Street, Phillip, leased by the Southern Cross Club, and other Canberra property assets.

The developer has options on the Melrose Drive site in addition to the car park, including up to 120 residential units, a club, commercial accommodation, entertainment or a drinking establishment.

Lease conditions stipulate work must begin within 12 months and the overall development completed within 48 months.

Jones Lang LaSalle ACT's Greg Lyons said selling under the hammer was a fantastic result, considering the car park requirement, and would trigger other developments in the precinct, including the government's re-release of ''Woden 9''.

JLL ACT managing director Andrew Balzanelli said six parties had registered to bid for land and three of them were strong contenders.

''[The sale] will generate positive economic knock-on benefits, with construction and a mixed-use development,'' Mr Balzanelli said.

The LDA revealed plans for an adjoining site, ''Woden 9'' last year, proposing 670 dwellings and structured parking spaces for 1000 cars in a major overhaul for the town centre, bus interchange and Westfield Woden.

New apartments would rise as high as Canberra's tallest building, the 93-metre Lovett Tower, as part of a drive for a compact city.

But that project drew strong criticism from Woden residents and was withdrawn in February this year.

Developers Amalgamated Property and Hindmarsh, in joint venture with the LDA, are marketing and building one, two and three-bedroom apartments at Woden Green near the Town Centre, and Myer will open at Westfield Woden at the end of this year.

LDA acting chief executive Dan Stewart said the sale on Tuesday would complement Westfield's redevelopment. He said the government's indicative land release identified several sites to be released over the next four years, as well as redevelopments.