Mr Gentleman has rejected the club's bid to remove the concessional lease at its headquarters on Blackall Street and former home next to Manuka Oval, ruling that it was "not in the public interest".

The Canberra Times understands it is the first time the minister has rejected an application to remove a concessional lease.

The matter will be referred back to the ACT Planning and Land Authority for final approval, but the agency is required to accept Mr Gentleman's decision.

Concessional leases are leases granted at below market rate to clubs and other groups, such as churches, which operate community or social facilities.

Removing the concessional lease would have allowed the club to press ahead with plans to redevelop the sites. It has previously earmarked housing and commercial developments at both sites, which were estimated to be valued about $50 million each.

But that vision won't be realised, at least for now, after Mr Gentleman this week ruled that it was "not in the public interest" to support the club's application to rescind the leases' concessional status.

The move has come as a shock and surprise to club president Mike Kinniburgh, who warned that it "may well be the end for the club" if the two developments did not proceed.

In a statement to The Canberra Times, an ACT government spokesman said removing the concessional lease on the Manuka Oval site would "jeopardise the government's significant investment" in the precinct.

"Retaining the concessional status of the crown lease will support the continued function of Manuka Oval as a sporting and recreation facility. The government is committed to encouraging tourism in this area," the spokesman said.

"As Canberra continues to grow, the land available for community purposes by community organisations is diminishing and it is important that we preserve what is left."

The Canberra Services Club was based at the Manuka Oval site until it was destroyed by a fire in 2011. In the wake of that incident, it merged with the Canberra Club, buying the old RUC Club on Blackall Street while also retaining ownership of what it still describes as its "spiritual home".

The GWS Giants and developer Grocon had sought to transform the Manuka Oval block, before Chief Minister Andrew Barr knocked backed the highly-cotentious, unsolicited proposal just two months before the 2016 territory election.

The Canberra Services Club was poised to relocate to the old Manuka Occasional Childcare Centre until that move was abandoned amid a public backlash.

This week, Mr Kinniburgh said the club had yet to be provided with an explanation for Mr Gentleman's decision, leaving him and members "confused".

He said the proposed redevelopments of the two sites were designed to shore up the financial future of the organisation, which is Canberra's only services club.

Without that alternative source of revenue, he feared the club would be slowly "starved out" and potentially forced to fold, leaving ex-military personnel, as well as police and fire servicemen and woman, without a permanent place to gather.

"We have really battled since 2011, trying to find a pathway forward," he said.

"You eventually get to a point where your capital is just not enough ... that may well be the end of the club.

"The ACT is a graveyard for small clubs who are not able to find other ways [to make money]."

Mr Kinniburgh said the club's board would seek clarification about Mr Gentleman's decision before meeting next week.