The key story in Washington dance for 1985 has been the yearlong Dance Place saga of triumph, trouble and rededication.

What's happened to the Dance Place is important not only because the institution plays a pivotal role in Washington's dance culture, but also because the things that have transpired there are emblematic of a nationwide dilemma.

In a nutshell, the situation is this: Small, feisty, progressive performing-arts groups across the country -- the ones that determine the artistic profile of the future -- are being squeezed out of their theaters and studios by escalating rents they helped induce. And there's hardly any place left for them to go, at least within metropolitan centers.

Typically, a group like the Dance Place seeks space in a "depressed" and often none-too-safe neighborhood. The group establishes itself, attracts audiences, improves the ambiance and the security. Before long, other enterprises -- restaurants, cafes, boutiques -- sprout up close by. That's the signal for the "developers" to hustle in and reap the benefits in terms of quick turnover, fat profits, high rents -- what they're mainly interested in developing is big bucks, and let the city's artists go hang. What's happening in America's cities today is that the arts are being used as fertilizer for the real-estate industry.

Last March, the Dance Place -- a nonprofit umbrella for the creation, performance and teaching of contemporary dance forms -- gained national recognition by being named as one of 14 such centers around the country to participate in a newly formed National Performance Network. In producing 40 weekend performances in its annual series, the Dance Place indeed had become one of the top such presenting spaces in the nation outside New York City. In another tribute to its achievement, the D.C. City Council passed a bill in June naming the entrance path to the Dance Place "Dance Alley."

The following month, the Adams-Morgan site the Dance Place had occupied for five years was sold. The new owners asked a rent increase from $1,500 to $6,000 a month. Amid ceremonies in September officially naming Dance Alley, city officials wrung their hands and said no stone would be left unturned in efforts to keep Dance Place in Adams-Morgan. But they proved powerless to halt the displacement. A three-month lease was negotiated at a compromise rent ($2,500) until Dance Place could find new quarters. Unable to find affordable digs in Adams-Morgan or anywhere else downtown, Dance Place earlier this month announced it had signed a purchase agreement on a property in the Brookland section of Northeast Washington.

Because Carla Perlo, the indefatigable and visionary artistic director of Dance Place, has been such a miracle worker in the past, hopes are high in the Washington dance community that the challenges now facing the organization -- raising funds for purchase and renovation and attracting a public to an area far off the beaten track of Washington night life -- can be overcome. The story may yet have a happy ending.

But the lesson for other dance groups is hardly a reassuring one.

Taking a look around the city, one sees that within the past few years, performing venues for dance at the Dance Place, the downtown YWCA, the old WPA building on G Street, Grace Church, American University and the Carter Barron Amphitheatre have disappeared. The city's Lansburgh project (once touted as the savior of indigenous arts groups but a disastrous bungle from the start), the present WPA on Seventh Street, the Joy of Motion studios on Connecticut Avenue and the Dance Arts Moving Arts studio in a downtown church are rumored to be in serious jeopardy.

A number of other locations -- new, refurbished or newly recruited -- have begun to take up some slack, including George Mason University's Harris Theatre, Montgomery College's Performing Arts Center, Mount Vernon College's Hand Chapel and Prince George's Publick Playhouse, but aside from Mount Vernon all are quite distant from the center city. The only new nearby facility to enter the picture is the Duke Ellington School of the Arts' newly remodeled auditorium, but it remains to be seen how accessible it will be to the city's arts groups. A few other sites -- the old Lincoln and Howard theaters, and D.C.'s Jewish Community Center -- have been under consideration for future use but remain dreams for the moment.

The space crunch, moreover, extends to major cities across the country, including New York, where, as a recent New York Times survey pointed out, all potentially exploitable areas and neighborhoods inexpensive enough for struggling arts groups have already been used up and one by one are being engulfed by the "gentrification" juggernaut. The Dance Place experience is proof positive that Washington is in the same boat. Clearly, if this dismaying trend is to be reversed, the problem will have to be addressed on a national scale and concertedly by the country's major power brokers in corporations, foundations and government.

All this needs to be viewed against the larger picture of the dance world as a whole, which appears to be in a state of unpredictable flux. The '80s thus far -- and we're now at the halfway mark -- have been an era of fundamental transition. Major ballet companies both here and abroad -- the New York City Ballet, American Ballet Theatre, England's Royal Ballet, Copenhagen's Royal Danish Ballet -- are acclimating themselves to a new generation of leadership in ways that have yet to crystallize; the same goes for important ballet companies in San Francisco, Boston, Philadelphia and Salt Lake City.

The Washington Ballet looks back on a decade of remarkable advance, but forward to a period of uncertain momentum. In the very broad realm of modern dance, American domination is being challenged by resurgent impulses from abroad, most notably in Germany, France, Japan and Canada. The ecumenism of the '60s seems to have acquired a fresh thrust, as borderlines between ballet and modern, New World, Old World and Third World, popular, folk and mainstream continue to be obliterated by new creative fusions.