Stewart & Co. will become the second major department store in downtown Baltimore, to close within the last 18 months, despite city plans to revitalize the downtown retail area.

Citing declining sales during the last eight years and $2 million in needed renovations to the store, Stewart & Co. President Edward M. Condon announced that "it would be economically unsound to continue operation in the downtown store."

Just 18 months ago another major Baltimore department store, Hochschild, Kohn & Co., closed. The departure of Stewart's leaves only the Hecht Co. and Hutzler Brothers Co. as large department stores downtown. The closings reflect a troubling pattern facing downtown retail areas in many major cities which must compete with newer more convenient suburban shopping malls.

In the wake of Stewart's decision, announced Tuesday, the store building was bought by a Honolulu-based real estate firm named the 3900 Corp. which plans to renovate the building at a cost "far in excess of $2 million" and lease it as office space -- preferably for one tenant, such as the federal government, according to 3900 vice president Joel Winegarden.

Winegarden said he could not disclose the purchase price for the building, which ne said is "basically sound" and houses 240,000 square feet of space.

The closing of Stewart's, on the corner of Howard and Lexington streets, "obviously is something of a blow," said Mark Wasserman, administrative assistant to Mayor William D. Schaefer. "But it's something we were prepared for. The others (Hecht's and Hutzler's) are strong."

When told of plans for using the Stewart building for office space, Wasserman said, "I don't think we would object. That is not at variance with our aim."

The store plans a sale and then final closing within the next 60 days, a company spokesman said. Stewart's will attempt to transfer its 200 nonoffice employes to the company's five profitable suburban stores.

Two years ago, the city unveiled a $210 million plan to revitalize a downtown retail district which William Boucher, executive director of the Greater Baltimore Committee, said yesterday "is a tough area." Boucher cited the area's physical deterioration. "It turns people off. It's not interesting. It's not exciting."

City officials still are waiting for some federal funds for the downtown area and hope to finish the refurbishing within three to five years after construction is begun, Boucher said. "While we're getting that done, businesses are losing," he added.

Spokesmen for Hecht's and Hutzler's both said they have no immediate plans for leaving the downtown area and were sorry to see naother downtown store leave because it would tend to diminish their business.

"Our position in the market place would appear to be somewhat stronger in the downtown area," said Hutzler Brothers President Austin Kenly. "Or we may be more patient than Associated Dry Goods Corp.," the national retail firm that owns Stewart's, Lord & Taylor and other stores.

Kenly said Hutzler sales are declining but that business remains profitable. "There does in fact come a point of no return. We haven't yet reached the point," Kenly stated.

Hutzler Brothers said more than a year ago that it plans to open a branch store in the burgeoning Inner Harbor complex, not far from the present downtown location.

Despite the announcement of Stewart's closing, Wasserman said the city will go ahead with its revitalization plans. Wasserman said the city hopes to capitalize on the city's subway system, planned for completion in the downtown area around 1982, and the continued attraction of shoppers to the Lexington Market and its dozens of food stalls.

The city also hopes to "capture a captive audience of people coming off the subway," similar to the way Washington's subway has improved shopping downtown arund the Woodward & Lothrop store, Wasserman said.

Baltimore's downtown retail section "has sufferd as one generation after another generation of suburban shopping malls have siphoned off the retail business," Wasserman said.

A statement issued Tuesday by Stewart's Condon said that "should the opportunity present itself at any time in the future to reenter downtown at an economically feasible location we would welcome such a move."

The city's plans for rebuilding the downtown area include a retail mall corridor along Lexington Street anchored at the west by the Lxington Market and extending east toward Charles Center. Also planned are new office buildings with retail space and conversion of Lexington Street into a covered mall.