The £1bn project to redevelop the Chelsea Barracks site in central London has become a two-horse race between Sir Robert McAlpine and Bovis Lend Lease after Balfour Beatty Management and Mace dropped out.

It is understood that the winner of the construction management contract will be decided in the last week of August.

The two firms will be particularly keen to win it after a £600m City office they were bidding for was abandoned last week.

The deal to build the 12.8-acre Chelsea Barracks scheme, developed by Candy & Candy and designed by Rogers Stirk Harbour + Partners, is one of the few residential schemes coming to market at the moment and it is unclear when work will start on site.

A source close to the project said: “The residential and retail markets are shot to bits at the moment, so it’ll be very interesting to see how quickly this project comes forward.”

Bovis Lend Lease and Sir Robert McAlpine had both been in the running to build a 1 million ft2 City headquarters for US investment bank JP Morgan, but this collapsed last week after the client decided to take up space at Canary Wharf instead.