Two Washington businessmen have proposed a $3.5 million project on Seventh Street downtown that would relocate the city's leading commercial galleries from the P Street Strip to within walking distance of the National Gallery's New East Wing.

Bobby Lennon, an attorney who as founder of Artransport moves art for his living, and his partner Stanley Westreich, an art collector and real estate developer, say they have lined up financing and will sign a lease within the next few weeks.

Lennon and Westreich have won the right to negotiate a 99-year lease with the Pennsylvania Avenue Development Commission, owner of the six connected 19th-century buildings at 401-417 Seventh St. N.W.

"Gallery Row," which Lennon plans to open "before May, 1980, would have space for 14 different galleries, studios, art supply stores, a bookshop and a coffeehouse as conceived in plans drawn up by the architectural firm of Hartman-Cox.

PADC officials yesterday advised caution until the lease is signed, but one conceded that in one form or another the Gallery Row project "is likely to proceed."

"If it does, I'm moving in," said dealer Harry Lunn, who each year sells more than $1 million worth of art from his Georgetown gallery at 3243 P St. N.W.

"And I'll tell you why," said Lunn. "Think of the out-of-towner, the collector, curator or dealer who has to come to Washington to see the city's art. He's got to see the East Building, the Hirshhorn, the NCFA, the Portrait Gallery. He can't afford not to. Once he's seen all of those museums - and 14 commercial galleries at Gallery Row - he'll be beyond the point of saturation. He's not going to take a taxi to P Street and to Georgetown. You either catch him downtown, or you don't catch him at all."

"I'm moving in, too," said the Pyramid's Ramon Osuna. "If all the galleries get together there it will be an irresistible drawing card. There is only one hangup: How much will it cost? Lennon says he'll rent out space at between $10 and $12 a square foot, but we haven't seen his final figures. If it makes sense economically - and Lennon says it will - I promise you a lot of dealers will be happy to move down."

"If the figures make sense, I'll move downtown," said the Hom Gallery's Jem Hom.

"Would I move to Gallery Row? You bet," said P Street's Diane Brown. "I haven't seen Bobby's numbers, but I have my fingers crossed. P Street's rents aren't inexpensive. I want better space. I want bigger space. And Lennon says he'll offer me a custom-designed gallery with an opportunity to buy a long-term lease."

Dealers Rebecca Cooper, Nancy McIntosh of Protetch-McIntosh, Komei Wachi of Gallery K, and Barbara Fendrick also cited costs in their contemplations of a move. "It's a great idea," said Fendrick. "I'm not desperate to move, as are so many of my colleagues. I have an excellent landlord and gorgeous space (at 3059 M St. NW.), and I'm no dumbbell when it comes to prices, but it might be difficult to hold out."

Two P Street dealers, Jane Haslem and Henri, yesterday said that they prefer to stay just where they are.

"I've told Bobby," said Henri, "that I've been here so long, I'll stay here forever. It will be like uptown-downtown: for everyone who moves away someone will move in. The Phillips and Henri will stay here in the neighborhood until hell freezes over."

"I might buy a space in Gallery Row - it's a great idea financially," said Chris Middendorf of Middendorff/Lane. "But I do have morries. I'm afraid of homogenization. There is a danger that 14 galleries, all in the same building, would lose their separate identities, and I would hate to see that.And how do you get 14 art dealers to agree on whether to stay open Sunday afternoons? Or on anything else? It's bound to be a headache."

Lennon says he is willing "to either condominiumize the project, or rent space to the galleries, depending on their needs." He says he has already been contacted by dealers in New York and Europe "who've told me that they would be willing to move in."

As the dealers are aware, millions of dollars will be poured into downtown in the next decade. New housing, a convention center and hotels are being planned. Portios of Eighth Street and Indiana Avenue will be turned into parks and closed to motor traffic.

The region of the P Street Strip also is being redeveloped. New construction there, particularly on 21st Street NW, has convinced many of the area's dealers that their small old buildings may not long survive, and that, at any rate, their rents will increase.

The six adjacent buildings planned for Gallery Row lie in what the Pennsylvania Avenue Development Commission calls "an historic preservation enclave."

The three closest to the avenue are known as the Crandall Building, named for architect Germond Crandall who designed their early prefabricated concrete facades in 1877. The fourth, a 1950s shoe store of no architectural significance, will be demolished and replaced by a stair-and-service core that will serve the other five. It probably will be given a salvaged Victorian facade. The tallest building in the row, 415 Seventh St., was designed by John Granville Meyer in the 1880s. Its older neighbor to the north will also be preserved.

All six now stand empty. "They were damaged by fire a year ago," said architect George Hartman. "In effect, we'll build an entirely new structure onto which we'll hang the buildings' old facades." His preliminary plans call for ground-floor shops, then four stories (or 36,000 square feet) of gallery space, and one or two stories of skylit artists' studios set back at the top.