A small building of much utility (3)
I believe the answer is:
hut
'a small building' is the definition.
'of much utility' is the wordplay.
'of' indicates the answer is hidden within the clue.
'HUT' is hidden in the letters of 'much utility'.
(Other definitions for hut that I've seen before include "Small crude shelter" , "Small house, shed" , "Simple dwelling" , "Simple house or shelter" , "Small shelter as for watchman" .)