Restoration used to be something Washingtons thought went on exclusively in Georgetown, Old Town Alexandria, Capitol Hill and Foggy Bottom. But in the past year it has begun to change many neighborhoods of the District, Arlington, Kensington, Takoma Park and elsewhere in the Washington area.

At the same time, new construction is no longer confined largely to the remote suburbs. People are paying very high prices for relatively small new dwellings in Old Town Alexandria, for instance, where sales have been unusually strong.

Now that rend is becoming evident in Georgetown, an area of historic restorations where for years new construction has tended to play a minor role.

Spurred by changes in zoning that have opened the way for residential construction along the waterfront, houses are being built in the area, south of M Street and north of K (under that visibly obnoxious but needed Whitehurst Freeway), up until now the haunt of old, ghostly industrial buildings.

(Residents of Georgetown, who have argued that the renewed waterfront should less commercial in natured than the revised zoning allows, filed suit against the changes, but that case has been pending in Superior Court since 1975.)

One of the waterfront sites, on a block of more than two acres bounded by Cecil Alley, Grace, K and potomac streets, is that of an old paper mill, in use until about 30 years ago. It includes three high, century-old masonry buildings.

Owned by a group of investors, the property is under contract for an undisclosed figure (likely to be around $2.5 million) to papermill Associates, a partnership of the real estate and development firm of Holland & Lyons and investor and former rental car magnate Warren E. Avis. The partners have been active in condominium conversions in recent months.

Settlement won't take place until August, but the Holland-Lyons-Avis group is busy making plans for a $20 million development on the site. Those plans call for the construction of 101 new, brick-fronted condominium townhouses as well as 90 ownership apartments in the three existing industrial buildings.

A small, two-bedroom unit should cost around $80,000, the developers said, a price now being approached in Old Town Alexandria.

Underground parking, some condominium retail/office space on K Street and a restaurant-club are part of the architectural plan and mock-up made by GMR Ltd., headed by Elliott Gitlin. John Carl Warnecke is the consulting architect. Holland & Lyons will build the project.

Partner Bruce Lyons plans to seek a District building permit in June; all other necessary approvals have been obtained, he sai.

Charles H. Atherton, secretary of one agency that had to approve the project, the Commission on Fine Arts, called the Holland-Lyons plan "a dramatic move, using new construction in small elements." The combination of traditional and contemporarty residential styling should add excitment to the waterfront area, much as has been done in Philadelphia's old Society Hill area near the Delaware River, Atherton said.

On an ajacent 65,000 square-foot-site, bounded by K. Potomac and 33rd streets and the C & O Canal, Weissberg Development Corp. plans to restore and develop the Wilkins-Rogers Flour Mill property into a combination of 100,000 square feet of office space and 80 luxury apartments. It will also include health and recreation facilities, parking space on three levels and a plaza with shops near the canals. The apartments - which may be rented or sold as condominiums - will be expensive.

Developer Marvin Weissberg, whose projects over the years have included three large office buildings in Rosslyn, said that ICON, a partnership of Peter J. B. Vercelli and John Holbrook Jr., is doing the planning and drawings for the $18 million project, which he plans to begin this summer. Weissberg said he is convinced that the market is strong in Georgetown for expensive apartments and office. "I already have an informal commitment for a good chunk of office space," he said.

The Flour Mill development has also been cleared by local agencies, Weissberg said. The project has also evoked interest from the National Park Service in beautifying and embellishing the towpath east from Key Bridge toward Rock Creek Park. At that end of Georgetown, a luxury hotel and small office building are slated to built at 2800 Pennsylvania Ave. NW. in a block bordered by the canal and park.

Additionally, Weissberg said he is working with the Smithsonian Institution to preserve and display an old turbine that was used by the flour mill.

Elsewhere along the waterfront, south of M and near they new Inland Steel office building and Foundry restaurant complex between 29th and 30th streets, office developer Robert E. Morrison is moving ahead with plans for a small hotel, a contemporary, personal residence 37 condominium apartments.