This is a piece of architecture to catalyse the way that Bonhams presents itself to the world," says Alex Lifschutz. As senior director of award-winning architectural practice, Lifschutz Davidson Sandilands (LDS), Lifschutz has the task of creating a new £30m international headquarters for Bonhams in London. This ambitious project involves nothing less than a full reconstruction of its New Bond Street site. In close collaboration with Bonhams Chairman Robert Brooks, he has arrived at a design that emphasises Bonhams' presence at the heart of one of the world's great art markets.

In the green-carpeted calm of his offices in west London, one can see images of the catholic mix of work that LDS has undertaken. It includes the sleek Hungerford pedestrian bridges, a five-storey headquarters for Rambert Dance Company, the renovation of the historic La Rinascente department store in Milan, and the creation of restaurants for Harvey Nichols in Knightsbridge, Edinburgh and Manchester. One reason that Lifschutz was chosen for the role was because his background in social sciences allows him to see architecture not as an end in itself, but as an instrument in changing the way that people think about their environment.

As he says, "Architecture is not just about dropping an object into a hole, it is about understanding an urban context." It is perhaps this sensitivity to the specific needs of an auction house, alongside
the particular social and cultural milieu of New Bond Street, that won Lifschutz the job. As Robert Brooks says, "Lifschutz Davidson Sandilands has come up with a concept that will be a real enhancement to this historic area of London and, I believe, the most fantastic auction setting anywhere."

The challenge that confronted Lifschutz at Bonhams was to create this "fantastic auction setting" out of a warren of buildings patched together over many decades from seven different freeholds,
with the well-known, Grade II listed, Art Deco tiled façade at the Blenheim Street entrance, and the distinctive red and white-striped Edwardian frontage at 101 New Bond Street.

One solution would have been to knock the whole thing down. But, as Lifschutz explains, "We didn't come to the project with a preconceived idea. We looked at what we could keep and what we should get rid of, and, in the end, we are keeping roughly half." An additional incentive to keep as much as possible of the original buildings was the need to keep the business fully operational throughout the refurbishment.

Traditionalists will be glad to hear that the existing main entrance on New Bond Street will be retained. Once through the doors, however, instead of the old corridor, visitors will discover an atrium reaching all the way to the roof. The entire interior of the old building will be removed, leaving just a few exposed beams to mark its history. Lifschutz explains the thinking: "You can look at it as a piece of art or a piece of vertical archaeology. We are exposing the structure of the building."

This grand entrance will then lead directly to the salerooms, a series of three double-height rooms, stacked one directly upon another and connected vertically by lifts. Each will have a skybox, enabling clients to view the spectacle of the sale from above if they choose to remain anonymous. Henry Mace, the LDS architect running the project, sees direct access to the salerooms as an important expression of Bonhams' relationship with the public: "Bonhams is more open, generally, to people coming off the street with an heirloom wrapped up in a bit of newspaper in a plastic bag."

Defining the unique character of the auction saleroom, and responding to that architecturally, has been a crucial task for Mace: "Although Bonhams displays works of art, it is also like a theatre, with a set design that changes regularly. Salerooms have to adapt to whatever is being sold that week, or even that day. So it's much more vibrant than an art gallery would be – it is not meant to be hushed and serious, yet, at the same time, it has to be able to sell major masterpieces."

To that end, though clearly demarcated, the main ground floor saleroom is not boxed off. Visitors will be able to catch the drama taking place inside and wander freely in and out, picking up the buzz of telephone bids and the auctioneer's patter. In addition, as Mace explains, "It was a key requirement of Robert that during previews, art works will be exhibited in all suitable public areas, including the reception."

The most dramatic change to the way Bonhams meets the public will be in Haunch of Venison Yard. LDS will replace the motley array of mews frontages with a similarly proportioned, entirely contemporary, three-part facade. Straight ahead will lie the main building, with its glass front divided in three by glazed lift shafts, so that all the activity of the auction house – the coming and going of visitors to all floors, the porters carrying objects, the excitement of the salerooms – will be visible to people below. A café will also be created to the left of the entrance.

Brooks and Lifschutz have not finished their quiet revolution there, however. Just as the public life of the auction house will be in open view, so too will the airy, open-plan, top floor work space, with a glass wall fitted so that visitors can see the experts working up there. As Lifschutz says, "The idea of making the process manifest is important. Works arrive, they are looked at, photographed, catalogued, taken to the sale room. I think that process is very interesting. Bonhams distinguishes itself from the competition by making it engaging and exciting."

This emblematic openness reflects a new mood in the art world. The arrival of the internet has made crucial sales information available to almost everyone. This has made establishing the value of cultural objects a far more transparent process. With its reconstruction, Bonhams – which is the UK market leader in nine specialist collecting areas –is celebrating its position and embracing this brave new world. What the design embodies, above all, is a determination to pioneer a new style of international auctioneering that is both populist and of the highest quality, achieving excellence without exclusivity.

Emma Crichton-Miller is an arts journalist for publications such as the FT, Apollo, Prospect and The Daily Telegraph.