The British architect Norman Foster has been selected to renovate a 17th century building to house an extension of Madrid’s Prado museum.

In a joint project with Spain’s Carlos Rubio, Foster will refurbish the Hall of Realms, not far from the main museum in the centre of the Spanish capital. The project is estimated to cost around €30m (£25m).

In a statement on Thursday, the museum said Foster and Rubio’s proposal “respects and values what is already there, adjusting it to the necessities of our times”.

The Hall of Realms is one of the only remaining buildings from the Buen Retiro palace, commissioned by Spain’s King Felipe IV as a second residence, and pre-dates the Prado which opened in 1819.

The Prado acquired the building, once Spain’s Army Museum, last year with the aim of increasing its exhibition space.

Foster and Rubio’s firms plan to open up the southern facade, creating a giant atrium that will give the impression that the building is semi-open, while keeping its original balconies.

“A new roof will harvest energy from integrated solar cells, give natural light to the galleries below and cantilever as a shade to protect the southern facade,” Foster and Partners said in a statement.

Foster, who led the bidding team, said he was honoured to contribute to the next phase of the expansion of the Prado.

The 81-year-old architect has worked on projects all over the world. His firm is responsible for the Millennium Bridge in London, a winery on France’s premium Chateau Margaux estate, airports in Panama, Jordan and Hong Kong, and the remodelled Camp Nou stadium, home to Barcelona football club.

Rubio founded Rubio Architectural in 2014. The firm works mainly on projects in Spain, but also in Russia and Saudi Arabia.