Locality surrounding a royal residence (6)
I believe the answer is:
palace
'royal residence' is the definition.
(I've seen this before)
'locality surrounding a' is the wordplay.
'locality' becomes 'place' (place is a kind of locality).
'surrounding' means one lot of letters goes inside another.
'place' enclosing 'a' is 'PALACE'.
(Other definitions for palace that I've seen before include "Impressive residence of a ruler" , "football team" , "Royal building" , "Large building" , "See 23" .)