Fresh designs on a modern monument

The building that used to house the Commonwealth Institute is a 1960s Millennium Dome. It is a monument to a fuzzy idea, which hoped to achieve through construction an image of confidence and certainty which the clients didn't have themselves. Like the Dome, it tried to look dynamic and modern, with thrusting buttresses and a parabolic roof, also tent-like, as if it sat lightly on the earth and could as easily be taken up and transported somewhere else.

As with the Dome, image was tripped up by reality. Its content - a series of exhibits about Commonwealth countries - struggled to interest people. The Commonwealth is itself a compromise, a palliative for loss of empire with some capacity for benign influence, so to create an institute about a compromise is to wrap something woolly in yet more wool. No amount of architecture can disguise this fact.

The supposed lightness and flexibility of the structure turned out to be an illusion, and, as with the Dome, finding a new use has not been easy. The original purpose of the Institute building was doomed when Britain joined what is now the European Union - an act which reduced the importance of the Commonwealth and made its countries less inclined to contribute to the Institute - and the exhibition space eventually closed as a permanent display when the exhibits were removed in 1996. Despite 15 studies and proposals since 1987, it remains forlorn and stubbornly empty, marooned at the southern end of Holland Park like some relic of a long-abandoned space programme. It occupies some intensely desirable real estate but is inert and valueless.

Yet it cannot be demolished lightly. It is a listed building, and rightly so. Designed by Robert Matthew Johnson-Marshall and Partners, the practice which had led the design of the Royal Festival Hall, it is a development of the Festival of Britain's spirit of playful modernity. It is no masterpiece, as cost-cutting led the simple idea of an oversailing roof to be bodged and compromised, and there are better modern buildings that English Heritage has failed to protect. But there are also many Victorian buildings much less ambitious and distinctive that are listed.

It also represents a moment in time. In South Kensington there is the 19th-century tower of the Imperial Institute, the Commonwealth Institute's predecessor, an even more useless structure. There is no question of destroying the tower, which is an emblem of its period, nor should there be of the tent.

The Dome was eventually rescued by becoming the O2. The Institute building's equivalent may conceivably, at last, be about to arrive in the form of the developer Chelsfield, which now owns it, and the Design Museum, which may relocate into the tent from Shad Thames. The Design Museum has been casting about for larger, better located sites for some time, and has flirted with moving next to Tate Modern, the Victoria and Albert Museum or City Hall.

The Commonwealth Institute site looks like its best bet yet. Chelsfield hopes to make a profit out of building flats around the tent, a chunk of which will go to the Design Museum. As Chelsfield is unlikely to win planning permission for its flats without a plausible public use for the tent, each party needs the other. Plans have now been revealed, with a view to putting in a planning application early next year.

The architect is the Office for Metropolitan Architecture (OMA), the Rotterdam-based practice led by Rem Koolhaas, one of the most celebrated architects in the world. Koolhaas's works include the monumental, nearly complete Beijing headquarters for China Central Television, a vertical oblong doughnut whose huge overhanging top seems eternally perched on the edge of constructional calamity.

Anyone expecting something as spectacular on the Commonwealth Institute site will be disappointed. Koolhaas's fame, in part, rests on his ability to surprise people, and his latest manoeuvre is to rebel against his own celebrity. His office is now exploring the idea of designing "ordinary" architecture. It has also found, in London, that it helps not to be too assertive.

"We find it very ironic working in London," says Reinier de Graaf, the OMA partner responsible for the Commonwealth Institute site, "because they hire famous architects who then have to apply all their talents to being invisible. You are allowed to have modern architecture, except it can't be seen."

OMA has already designed one low-key project here, the planned new headquarters for NM Rothschild in the City.

On the Commonwealth Institute site, it is allowing the original wonky tent to remain the most striking building, while making some deft adjustments to its interior to enable its conversion into the new Design Museum. It has simplified it, while enhancing its best feature, which is the sense of space under the curves and billows of the roof. It is proposing to let in daylight to what was previously a black box.

OMA wants to demolish the long oblong administration building alongside the tent, which is part of the original design but in itself is nothing special. In its place it wants to build three blocks of flats, from which will come the money to fund the whole project, as well as some profit for Chelsfield. The space around the blocks will be landscaped to create a sense that they are pavilions standing in a continuation of Holland Park.

The blocks will have simple shapes and regular gridded façades, albeit enlivened by patterned ceramic tiles and by projecting and receding balconies. Rising to nine storeys, they will not exactly be what de Graaf calls "invisible" but they are sited so as to reduce their impact on the adjoining street and park. Like the tent, they are aligned at 45 degrees to surrounding buildings.

Much will depend on the execution. Ordinary can easily become prosaic, and the flats could become the dumb blocks they almost resemble. The details of the tiles, and precise decisions about siting and landscape, will make the difference between subtle and banal. But the instinct to keep things simple, and to allow the 1960s building a monopoly on weirdness, is intelligent.

The history of the Commonwealth Institute's building has proceeded crabwise, rarely rationally, always with a mismatch of hope and achievement.

The original concept was misguided, the building interesting but flawed, and the decision to keep it, in purely economic terms, is perverse. Yet this series of wonky decisions could lead to the creation of an intriguing corner of Kensington. Without them, there would probably be just another run-of-the-mill block of flats.