The Oliver Carr Co. will be break ground Tuesday for the first phase of its King Street Exchange, an $18 million project on a two-acre site in Old Town Alexandria that is bounded by King Street, Prince Street and Dangerfield Road.

The project's first phase will consist of two adjoining five-story, Jeffersonian-style office/retail buildings at 1630 and 1640 King St.

The buildings will contain 48,000 and 62,000 square feet respectively, a relatively small size for office buildings.

Such smaller-scale buildings have grown increasingly attractive to associations and small companies that want to own yet don't want to lease the balance of the building space.

"Alexandria has been able to attract such associations and groups because land costs and size density allow the developer to build smaller buildings," said George Parr, leasing representative for Carr.

The State Department Federal Credit Union has purchased 1630 King St., which will house its headquarters when completed in October 1988.

"The remainder of the site is build-to-suit and has yet to be designed, partly due to the nature of the market," Parr said.

Omni Construction is the general contractor for the project, and Lewis/Wisnewski Associates Ltd. of Alexandria was the architect.

The balance of the office space there will be offered for purchase, joint venture or lease, a spokesman for the company said.

In other developments in commercial realty:

Hill and Knowlton Inc., a public relations firm, leased 21,117 square feet at 1201 Pennsylvania Ave. NW from Sonnenschein, Carlin, Nath & Rosenthal. Coldwell Banker was the leasing agent.

Dyncorp, a diversified services firm, leased 147,000 square feet at Summit East Building, 2002 Edmund Halley Dr., Reston, from Centennial Development Corp. Coldwell Banker was the leasing agent.

Health Enterprises Inc., a subsidiary of the Fairfax Hospital System, leased 88,000 square feet at Woodburn Medical Park, 3299 Woodburn Rd., Annandale, from Centennial Development Corp. Cushman and Wakefield was the leasing agent.