It seems to me the 'theme' of the original sentence is здание and the 'rheme' (i.e. the new, interesting information) is 'school'.
"In this building there is a school" actually isn't a neutral form of this. Its rheme is 'building'. The theme is 'school'. [it's answering "In which building is there a school?" we know there's a school, the question is about the building]
I think the way of getting at "In this building there is a school" would be "Эсть школа в этом здание" (but I don't recall if you can really begin a sentence with эсть).
You can begin a sentence with "есть". But on further consideration I think you're right.
It gets more or less the same meaning across, but it's not a neutral, default formulation, which the Russian is. At least when I went through the course a while ago, it seemed that for these kinds of sentences where the default word default differs so markedly between Russian and English, only the order that matched the neutral "feel" of the Russian sentence was accepted, which I took to be a pedagogical decision.
Based on comments on other similar exercises, your sentence would be more like Школа находится в этом здании.
When the place of location comes first in the Russian followed by the thing located there, then most of the time Duo translates that as "There is [a/the thing] (located) in [the place]". That often means the first word in the Russian sentence is a preposition.
When the first word is the noun followed by the location, then Duo usually translates it as "The [noun] is [in the place]".
At least, that's what I've picked up so far.