Trammell Crow Co., one of the nation's largest real estate developers, has agreed to buy a tract in the middle of the 14th Street porn strip, according to sources familiar with transactions in that area.

City officials said yesterday that the purchase and subsequent development of the site at 14th and I streets NW would be a major step in the transformation of a part of the old downtown that has been characterized by seediness and sex.

According to sources familiar with development in the area, the developer will pay prices averaging $800 a square foot for the half acre of property, which was assembled from several smaller parcels, including the site of the Gold Rush bar and several sex-oriented businesses that recently were boarded up.

Although a handful of isolated sex-oriented bookstores and all-night porn theaters still remain in the area, construction of a new 200,000-square-foot office building at 14th and I streets NW by the Dallas-based development company would fundamentally change the nature of the block, which until recently was lined with low-rise sex shops and bars.

Trammell Crow confirmed that it will put up the office building and that the company wants to improve the area, but its executives declined to answer questions.

Both city officials and other landowners who have invested in the area known as Franklin Square have been actively trying to change the neighborhood's image. "The land assembly under discusssion has been the largest remaining obstacle to completing the mayor's promise to turning the Franklin Square neighborhood around," said David Smith of the office of the deputy mayor for economic development.

The property Crow plans to develop includes the Gold Rush bar, the last sexually oriented business in the area still with a liquor license; four former sexually oriented businesses that have been closed and boarded up; Popeye's Famous Fried Chicken building; the American Postal Workers Union building, and the Parkside Plaza Hotel, sources said.

James Bakalis, owner of the Gold Rush, and William Burrus, executive vice president of the American Postal Workers Union, said they are in negotiations with Trammel Crowover the sale of their buildings.

Part of the deal is a $12 million joint venture with Jeffrey N. Cohen, who owns 14,000 square feet of the site, including the hotel, fast-food chicken restaurant property and the boarded-up nude-dancing nightclubs that were forced to shut down last year -- the former Benny's Home of the Porno Stars, The Butterfly Clu, The Cocoon and The Californian Steak House.

Cohen said that the newly formed partnership plans to demolish the Gold Rush soon. Cohen also has a written agreement with Popeye's to terminate the company's lease, and he said construction of the office building will begin soon.

Prices for the properties varied, but Cohen said they were about $800 a square foot.

"This is significant because it represents Trammell Crow's entry into the hottest real estate in the area," said Arthur Schultz, executive director of the Franklin Square Association, founded last year by area developers and real estate brokers concerned with sprucing up the area's image. "They will bring an end to 14th Street as we know it."

According to the association, 3.5 million square feet of office space has been built in the 15-block area since 1981, making it the fastest-growing real estate market in the metropolitan area.

Sexually oriented businesses have been increasingly squeezed off of 14th Street, under pressure by developers who find the neon strip between H and I streets NW at odds with their development plans for expensive office buildings.

This Is It?, which offers "female Jello wrestling," is one of the nude dancing clubs that still remains on 14th Street despite the loss of its liquor license two years ago. The Adam & Eve video arcade and porno bookshop next door also has survived.

City Council member John Wilson (D-Ward 2) said, "This is a giant step to change the character of the area. In another five to 10 years, nobody will know what the four-block radius [around Franklin Square] once looked like."