The Pennsylvania Avenue Development Corp. said yesterday it will choose between two development groups to build a massive office and residential complex at the Market Square site along the avenue, including one that is now developing the Georgetown waterfront and one that helped renovate the Old Post Office building.

The government-created agency met behind closed doors at the National Archives for 8 1/2 hours before voting 11-to-1 to eliminate two other developers who also sought to develop the site along the north side of Pennsylvania Avenue NW between Seventh and Ninth streets.

Henry A. Berliner Jr., PADC's chairman, emerged from the meeting to tell an anxious group of 30 developers, lawyers and architects that the PADC board will not make a final choice until Nov. 15. But he said the board has narrowed its choice to these development groups:

*Lincoln Property Co. of Dallas, along with Evans Development Co. of Baltimore and Oxford Development Enterprises Inc. of Lanham, which has proposed a project with 225 housing units, 350,000 square feet of office space and a "central market" with 85,000 square feet of food stores, cafes, shops and movie theaters.

Their $140-million proposal, like those of their competitors, calls for two semicircular buildings behind the Navy Memorial that is now in its initial stages of construction. The Lincoln Property proposal was designed by the architectural firm of Skidmore, Owings and Merrill.

The Evans firm refurbished the Old Post Office at 12th Street and Pennsylvania Avenue and reopened it as the Pavilion, a collection of shops and restaurants that has proved a popular noontime gathering place for the growing number of office workers who make Pennsylvania Avenue their workaday home.

*Western Development Co., Kan Am Realty Inc. and the architectural firm of Hartman-Cox, all of Washington, which has proposed a $130-million project that would also include 225 housing units, ranging in price from $137,000 to $210,000, as well as 379,000 square feet of office space and 70,000 square feet of retail space.

Western is currently building the mammoth -- and controversial -- Washington Harbour commercial and residential complex along the Potomac River shoreline in Georgetown. The firm also built the Georgetown Park shopping center and plans to construct a large addition next to the existing complex.

Berliner said the PADC board wants to talk further to the two development groups about their proposals, but that neither would be allowed to "materially change them." PADC has set a minimum $25 million price tag on the Market Square property, which is adjacent to the FBI Building and across from the Archives.

The two losing groups are headed by other Dallas firms, Rosewood Properties Inc. and Criswell Development Co. CAPTION: Pictures 1 and 2, Proposals for a residential office and shopping complex at Market Square include a $140-million plan and a $130-million project; Map, Market Square Development Sites. By Dave Cook--The Washington Post