The Alexandria City Council unanimously approved a developer's $10 million plan last night to add a restaurant, a gourmet food market and a building with shops and offices to the Torpedo Factory complex on the Potomac River waterfront.

The approval gives the go-ahead to the final phase of the $50 million Torpedo Factory project that is turning the decaying World War I buildings, where torpedoes were once manufactured, into the city's number one tourist attraction.

"It's the centerpiece of our waterfront development," said Mayor James P. Moran Jr. about the arts, office and restaurant complex in the two waterfront blocks between King and Queen streets.

A restaurant designed as a turn-of-the-century boat club, a one-story, 7,100-square-foot gourmet market offering seafood and health and ethnic foods, and a three-story mixed-use retail building should be completed within two years, according to the plan.

The developer, Realco International Inc., agreed to lease the property from the city for $96,000 a year for 60 years beginning in 1988 or when the project is complete.

Eugene F. Daly, Realco's project manager, described the development as "a festival marketplace, similar to but on a smaller scale than Baltimore's Harborplace and Boston's Quincy Market."

In 1982, Realco, a New Jersey-based firm, began renovating the shut-down World War I buildings and rebuilt an arts center to showcase local artists' work. The pottery, painting and crafts center, together with accompanying offices, shops and pedestrian piers jutting into the Potomac, attract 600,000 visitors a year, according to city estimates.