Impresario unveils plan for intimate theatre to house extended runs as part of £35m West End facelift

Sir Cameron Mackintosh revealed his plans for a new theatre in the heart of the West End yesterday as part of a £35m facelift for his London venues. The 500-seat Sondheim Theatre will be the first addition to Shaftesbury Avenue, a main artery of the country's theatreland, for more than 70 years.

The Sondheim will be part of a three-theatre complex, to include the renovation of the Queens and Gielgud theatres, and will bring the impresario's London theatre portfolio to eight venues. The project, due to start in 2006, will use up to £20m of the investment.

Sir Cameron is among several leading figures in theatre to have said that the tatty state of the West End is putting off potential theatregoers.

Although a rise in audiences for big London shows helped audience figures pass 12 million for the first time in 2002, smaller theatres have suffered since tourist numbers fell because of the foot-and-mouth outbreak and the 11 September attacks in 2001.

The revamp will transform many of Sir Cameron's theatres, increasing the size of some of their notoriously small bars and adding lavatories.

The Shaftesbury Avenue project is the most ambitious of the works and will provide a communal foyer for the existing theatres. The development of the Queens Theatre will increase the seating by more than 200 to 1,213, over two instead of three floors. The extra floor space above the Queens will then be used to form the Sondheim, which is scheduled for completion in late 2008. The theatre, named after the composer and lyricist Stephen Sondheim, will take extended runs of musicals and plays transferred from smaller theatres in the capital such as the Almeida and the Donmar Warehouse, as well as from regional theatres.

Michael Attenborough, the artistic director of the Almeida, said the possibility of transferring shows to the 500-seat Sondheim was wonderful. "Artists who have achieved intimacy and electricity in a small space are reluctant to explode that by moving to a 1,200-seater," he said.

Referring to a city with theatres called, for example, Her Majesty's and the Prince Edward, he said: "Isn't it refreshing to have a theatre named after an American?"

Sondheim said he was thrilled the theatre would be named after him and welcomed the chance for subsidised studio playhouses to have extended runs. "We have a lot of such theatres in New York and the plays they house are the lifeblood of new American playwriting. Let's hope this playhouse is the first of many such venues in London."

Martin Denton, head of the New York Theatre Experience, which promotes new writing talent, said a dozen such theatres had opened there in the past six years. Plays not normally given a long run had benefited, he said. Productions such as How I Learned to Drive by Paula Vogel - a play about child abuse - achieved critical success and later transferred to London.

Sir Cameron, who has a fortune of about £300m, also intends to refurbish the Prince of Wales. The £7m overhaul begins in September and the theatre will reopen early next year. Among the other projects are a £1.7m upgrade of the Strand Theatre, which will include restoring a London flat where Ivor Novello lived.

Sir Cameron said the success of the Abba musical Mamma Mia! had enabled him to invest in the refurbishments. He denied that the renovation work would lead to an increase in ticket prices. A larger complex in Shaftesbury Avenue would lead to "huge savings" in staffing costs, he said.