Construction is proceeding on the historic Demonet Building project on the southeast corner of Connecticut Avenue and M Street NW. The project involves the rehabilitation of an existing 19th-century building, and the addition of a 12-story office building directly behind the historic structure.

The four-story Demonet Building was built in 1846 to house a candy factory. The building contains 12,000 square feet of space. When completed, the two buildings will have a total of about 134,000 square feet of space.

Once the new structure is erected, the floor joists of the old building will be replaced with steel beams, which will be attached to the floors of the new building. New concrete floors will be poured in the older structure.

The roof of the older building will serve as a fifth-level terrace for the new structure. For the sixth through 12th floors, the new building will rise flush with the back of the older building.

The owner of the project is Second British American Properties Inc. of New York City. The developer is Viking Property Group Inc., also of New York City.

Omni Construction Inc. of Rockville signed a $6.1 million contract for the project, which is scheduled for completion in May 1984.

Other recent developments in commercial realty in the metropolitan area:

* Sage Systems Inc. has relocated its corporate headquarters from Bethesda to a new 50,000-square-foot facility at 3200 Monroe St. in Rockville. Sage is a software-products firm specializing in programmer-productivity systems and audit software.

* A Touch of Naples carry-out restaurant has leased about 3,000 square feet of space at 1101 14th St. NW. The aggregate rental value of the long-term lease is about $1.2 million.

* Arabian Oil Co. has leased 2,300 square feet of space at 1001 22nd St. NW for its education office. The aggregate rental value of the long-term lease is about $300,000.

* The law firm of Golden, Freda & Schraub has leased about 7,000 square feet of space at 1625 Massachusetts Ave. NW. The aggregate rental value of the long-term lease is about $800,000.

* Virginia Gemological Enterprises Inc. has leased 1,000 square feet of space at the Kossow Office Center at 380 Maple Ave. in Vienna.

* The law firm of Carr, Jordan, Coyne & Savits has signed a five-year lease for the fifth floor, covering 16,700 square feet of space, at 1030 15th St. NW.

* Scientific Management Associates has leased 21,488 square feet of space at the Metroplex office complex at 8401 Corporate Drive in Landover.

* SystemSource, a division of Federal Data Corp., has leased 3,898 square feet of space at 7910 Woodmont Ave. in Bethesda. SystemSource is a national distributor of microcomputer software.

* Social and Scientific Systems, a computer-systems development company, has leased 16,433 square feet of space at 7101 Wisconsin Ave. in Bethesda. The aggregate value of the lease is about $1 million.

* Aetna Casualty and Surety Co. has leased 76,200 square feet of space at the Park Place office building at 7926 Jones Branch Drive in McLean. Aetna will occupy the building's second and ninth floors and portions of three other floors. The lease is for five years.