After several decades of decline, the lower end of the downtown corridor of 7th Street NW is slowly coming back to life - as a center for artists.

They have been drawn downtown by cheap rents and large spaces that can be converted into studios. And they are keeping an eye on the old Lansburgh's department store, which is to be the spiritual center of the burgeoning arts district.

As downtown Washington begins to be redeveloped, the art presence in that area is becoming more formalized. Within a few years, it is most likely that the 7th Street area will see two performing arts centers, dozens of galleries, studios, lofts, a new museum and other related facilities.

The first major step in the revitalization of the area is the proposed conversion of Lansburgh's into a Washington Humanities and Arts Center. The center would occupy the lower level, first floor, mezzanine, and part of the second floor of the building - an area of about 100,000 square feet.

The National Archives and Record Service, which rents the building from the Pennsylvania Avenue Development Corp., would continue to use the upper floors of the building for record storage and other administrative functions.

The proposed center would be a central facility for various non-profit arts groups in the city. Many of these groups are being squeezed out of their present homes because of rising property values and rents throughout the city, especially downtown.

If the PADC board gives final approval to the center this summer, it would be completed in about a year. It would have five kinds of performance spaces, galleries, exhibition areas, workshops and a restaurant.

The 27 groups who are presently selected to use the building would pay rent of $1.50 a square foot.

It is hoped that the center will help bring people back to the downtown.

Joseph Papp, the New York theatrical producer and entrepreneur, says he is about to contract for construction of a complex at 8th and E streets that will house a "multi-facility experimental theatre facility." Papp said the non-profit operation will place a strong emphasis on minority arts.

The producer has been touring the downtown area, and plans to open an office in Washington to become more familiar with the city.

But the Pennsylvania Avenue Development Corp. says serious discussion of a Papp facility downtown is premature. A spsokesperson said no decision has been about approving Papp's plans.

Across the street from the old Lansburgh's, a private entrepreneur is developing his own arts project.

Robert Lennon, owner of Artransport, an art delivery service, has leased the Germond-Crandell building at 415 7th St. from the Pennsylvania Avenue Development Corp. for 99 years.

Lennon and other investors, with the aid of the architectural firm of Hartman and Cox, will restore the burned-out building into a 50,000-square-foot complex with 12 art galleries, six loft studios and retail space.

"I move art for a living," Lennon said, "and I see it shifting to Washington in greater numbers. There's no mystery as to why, either.

"The National Endowments (for the Arts and Humanities) are here. The Institute of Museum Services is here. The Hirshhorn opened a few years ago on the Mall, and now there's the (National Gallery of Art's) East Wing.

"Now that art is moving, Washington is growing as an art town," Lennon continued. "Somebody has to make a commercial art center available to serious collectors in a convenient and easy way.

"Seventh Street is the best location for it. It's always been a corridor. There are two Metro stations and it's close to the Mall."

Lennon thinks that in order for a commercial art environment to thrive, galleries must be located close to each other, for the convenience of the collector and for gallery competition. He believes 7th Street will become more attractive to big local and New York galleries, especially as the real estate values in Georgetown and on P Street (the current gallery areas) continue to soar.

Lennon's complex, called "Gallery Row," will lease space to galleries "for $12 to $15 a square foot, maybe higher," he said.

Preliminary construction and foundation testing is now going on at the site, with "full-scale construction happening when the weather gets cooler," Lennon said.

Up the street, at 625 E St., a 3 1/2-story structure is up for rent from Gallery Management, a firm that is already working in the downtown area.

Paul Pollinger, a partner in the firm, is hoping to rent the first floor for use as a restaurant, with galleries, print shops, or studios on the upper levels.

He feels that the current reluctance of tenants to locate there is based on a lack of knowledge of the 7th Street area.

"I think that downtown is on the threshold of becoming an art center, but it will take about three or four more years to fill up," he said. "The arts in Lansburgh's is a plus, but there hasn't been eough publicity within the art community about the potential of this area. People are waiting to see what happens; there's a lot of speculation and gambling."

One operation that has taken the gamble is "d.c. space," a restaurant, bar, and performance loft that has been operating at the corner of 7th and E streets for nearly two years.

Owner Bill Warrell said he and his partners aimed at helping establish an art scene rather than trying to break into the more formal P Street area.

"I was looking for a big cheap place to open quickly, and downtown was the only part of the city in which it could be done," he said. "A real estate agent told me about this big carryout with vacant space about it, but the first time I walked up 7th, I said "Forget it." The street had been dug up and closed for six years because of Metro. The area was desolate."

However, Warrell saw potential in the then-unopened Metro, with major stops (Gallery Place, Metro Center) nearby, and the broad downtown shopping district.

Currently, "d.c. space" does a healthy lunch business, Warrell said. A new bar has been opened next door, and he says his business is growing with the area.

At the same time, however, the restaurant is still losing money, "due to expansion and inexperience," and has been kept going through various investigators and loans, Warrell said. But he said he is not worried because the past two years have given him time to "get ready for what will be happening downtown within a year."

The owners of Alberty Carry Properties, a real estate firm that has been operating in the city since the beginning of the century, has recently put a building at the southwest corner of 7th and D streets up for lease.

"The schlock joints aren't calling" spokesman Charles Carry said. "I've had filmmakers and a few artists call, and even a couple of young lawyers who wanted to put in a barroom and big-band dance hall, but when things get serious, nobody knows what PADC is going to do; it's the biggest bugaboo."

Carry said that the building, which has been vacant for several years, is in bad shape, especially the upper five floors.

"You need a few years to fix the place up and make back your costs. What happens when some guy goes in and spends a lot of money and someone up there (at PADC) pushes a button and we go?," he asked, referring to PADC's plans to demolish all of the buildings in the are bounded by 7th, 9th, E and Pennsylvania in 1986 to make way for a "superblock," a walled town house development.

The complex would have 750 dwellings, an estimated 150,000 square feet of retail space and 240,000 square feet of office space. Also proposed is the inclusion of 1 million square feet of underground storage space for the Archives.

Proponents of the plan say housing is needed to make the downtown lively. Preservationists argue that the older buildings should be recycled instead of torn down.

Aware of growing controversy about a downtown housing project, officials at PADC point out that a large portion of 7th Street is designated as a historic preservation zone, calling for smaller-scale construction and preservation.

t another project under consideration in the downtown is downtown is the conversion of the U.S. Tariff Commission building on E Street between 7th and 8th into a museum facility.

The building, which used to be a post office, is a Greek revival structure that was erected in two sections between 1839 and 1844 and 1855 and 1866. tion's assistant secretary for museum programs, says to the nearby National Portrait Gallery and National Collection of Fine Arts at 8th and F streets. Use of the building for the Washington Archives of American Art is also being discussed.

Conversion by the General Services Administration and Tariff for some time by the District Government.

Alvin McNeal, chief of ward planning for the D.C. Office tion of an artist's community is hopeful, it brings life to the city." CAPTION: Picture 1, no caption; Picture 2, Art galleries and studios are planned for building at 7th and D streets NW. Photos. Copyright (c) , Linda Wheller; Picture 3, Carry real estate firm is trying to lease building at 7th and D Streets. Copyright (c) Linda Wheller