A Washington development firm has proposed a large mixed-use complex on the site of the aging, empty Park and Shop shopping strip in Northwest Washington's Cleveland Park neighborhood. The plan is likely to test the neighborhood's victory last year when the city declared the once-quiet residential area a historic district.

The proposed 11-story, 210,000-square-foot building composed of offices, shops and 62 residential units would replace the dilapidated, one-story commercial strip, which was the center of a battle two years ago between developers who wanted to raze the center and neighborhood activists seeking to slow development in the area.

The new plan has already created a split between Connecticut Avenue shopkeepers eager to attract more business to the area and the neighborhood's preservationists and residential leaders who want to prevent Cleveland Park from becoming what they called "Bethesdaized" with high-rise offices.

Shopkeepers and the project's developer, the Urban Group, contend that the building is needed to revitalize the area's commercial district as have projects in other areas of the city that are near Metro stations. But some residents maintain that Cleveland Park has been a quiet neighborhood for generations and it should remain that way. It is a fight in which emotions are not mixed.

"They live in a city and must understand the economics," said Pat Daniels, a partner in the development firm proposing the $35 million complex. "If you want quiet, then you go to the suburbs. This revival is quite wonderful and stimulating. If you want to live in the city, you have to take the good with the bad."

D.C. Councilman Jim Nathanson (D-Ward 3) retorted, "We could make a decision to pave over all of Ward 3 {and} transfer everyone out to the suburbs. But we don't want that to happen. I don't think a subway station means that you have to turn everything around it into office space and upscale development. We don't want this place to be another Rosslyn."

Tersh Boasberg, president of the Cleveland Park Historical Society, which successfully fought to get the neighborhood declared a historic zone, criticized the Urban Group plan for proposing the same type of high-density office development that is being built in other areas of the city, such as in the Wisconsin Avenue corridor.

"I think they are testing Connecticut Avenue," he said of the developers.

With the D.C. Zoning Commission preparing to consider a major down-zoning of portions of Connecticut Avenue that would limit the height and bulk of buildings along the busy corridor, the Urban Group's proposal might have a difficult time winning approval.

Current zoning at the proposed site allows buildings to be a maximum of 50 feet tall. Under the Connecticut Avenue down-zoning plan proposed by Mayor Marion Barry last year -- just a few weeks before the city's elections -- building heights would be limited to about 40 feet. That plan will be examined next month by the zoning commission.

As proposed, however, the Urban Group building would be 108 feet tall on the northern end and about 50 feet tall on the southern end. The building would have 146,000 square feet of office and retail space on four floors and 62 residential units that would rise seven stories above the offices on the northern portion of the complex.

Fred Greene, the District's planning director, said he is concerned that the proposed building's height "does not meet" the requirements of the down-zoning plan for portions of Connecticut Avenue. "If I had a choice between offices or retail and housing, I'd take the retail and housing," said Greene, whose formal recommendations on the project will be sent to the zoning commission next month.

The decaying Park and Shop strip center does not seem like the sort of structure that generates heated historic preservation confrontations. But two years ago, neighborhood activists used the Depression-era facility to stop developers wishing to develop the site. At the time, the Cafritz Foundation, the present owners of the center, wanted to demolish the shopping center to make way for development of the site that would have been similar to the Urban Group's plan in terms of bulk. The Urban Group has a contract to purchase the site from Cafritz. That transaction is to be finalized if its development request is approved.

Opponents blocked the Cafritz demolition plan, in large part by having the city designate the neighborhood a historic district. Consequently, demolition of buildings and the new projects proposed in their place now must be approved by the city's Historic Preservation Review Board and the normal zoning officials .

But Daniels is confident that her proposal will be able to bypass the area's low-density zoning and historic status. "This is classic Washington design," Daniels said of her building proposal, which she said will blend in with the other structures in the area, despite the building's bulk.

Daniels said her firm, incorporated in Delaware, was formerly called CDS Cos., a company she headed with her former husband, Robert Holland. D.C. corporation records show that one of three board members in that company, formed in 1982, was Ivanhoe Donaldson, the District's former deputy mayor who pleaded guilty in December 1985 to stealing more than $190,000 from the city government. The former political confidante to Barry was given a seven-year sentence and is now in a Petersburg, Va., prison.

Daniels said Donaldson "had nothing to do with" the day-to-day operations of the corporation and made no profits as a board member.

Most Cleveland Park merchants support the Urban Group's development plan, according to Robert Abbo, owner of the nearby Roma Restaurant and head of the neighborhood's business owners group.

"It seems only fair that development begin here. Cleveland Park is getting old. It needs a face lift," said Abbo, who lives in the neighborhood.

He said numerous small merchants have been forced out of the area in recent years because of rising expenses that are not being matched by increasing business. He called the proposed building "lovely" and the Park and Shop a "piece of junk."

Neighborhood preservationists said they are not seeking to prevent a total demolition of the shopping center, which some architectural historians have said is the earliest example in Washington of shopping centers with off-street parking. It is also believed to be one of the oldest strip centers in the country.

The preservationists said they would welcome development of the center, providing it is residential or small-scale retail space, and not an office center. In addition, they said the high annual rates proposed by the Urban Group for the building's retail space -- in the mid-$30 range per square foot -- would not attract any small neighborhood-type stores, but only upscale shops that some residents said they do not need.

"I don't want to get pinned into a 'stop development' portrait," said Boasberg of the historical society. "We'd like to see the site developed, but we feel that development must be compatible with the rest of the area. We just don't want to rip down buildings in a historic district."