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Building damage induced by the excavation conducted for the three-storey basement of the Kerry Center – a modernised business centre comprising large-scale departmental stores, business offices, apartments and a hotel in Hangzhou, China – was investigated. A method for estimating the building damage level considering the spatial effects of soil deformation around the excavation was also developed. The excavation site is in the Hangzhou urban centre, near to which stands an ancient building known as the Red House. Settlement, horizontal displacement and cracks on the Red House were studied to estimate the actual damage level. Surface settlements around several excavations were analysed to obtain a surface profile along the excavation. The results showed that the profile could be simplified to a parabolic model. A damage criterion based on the average state of strain in the distorted portion of the structure was derived considering the spatial effects of soil deformation. Different damage criteria, including tensile stress, cracks, distortion and horizontal strain, were used to evaluate the damage level of the Red House. The result obtained from the damage criterion presented in this paper agrees well with the actual building damage level. This criterion formed the basis of the preliminary analysis conducted prior to finite-element modelling. [ABSTRACT FROM AUTHOR]