Shanghai Tang store on Madison Avenue in November 1997, the ladies who shop

were delighted. Blaine and Robert Trump hosted a party; Mr. Tang clinked

glasses and rubbed silk elbows with Nan Kempner and Chantal Miller. That

was followed by a lavish opening, thrown by the designer himself, in the

12,000-square-foot space (formerly Express) across the street from Barneys

that he had sublet for $2.5 million to $3 million a year. (The company was

also required to put up a $5 million security deposit.) The

party–smack in the middle of New York fashion week–was an elitist

success: Too many invitations left celebrities, fashion editors and

clotheshorses standing in the cold. The police came and the party landed on

the gossip pages.

Two years later, the buzz on Madison Avenue has turned against the

store. "Shanghai Tang is not long for this world," said Beth

Greenwald, a broker with New Spectrum Realty Inc.

According to several brokers, the Hong Kong-based company is consulting

with a committee of Madison Avenue retail experts about what to do with the

store. In January, Shanghai Tang promoted a new chief executive, John

Aexel; his primary responsibility is to research all possibilities for the

company's three stores. That same month, according to Women's

Wear Daily , Laura Pomerantz, a broker at Newmark & Company, was

hired to market the Madison Avenue space. The store will downsize or shut

its doors altogether, a member of the committee told The Observer .

Neither Mr. Aexel in Hong Kong nor Adelina Wong, director of marketing in

New York, would comment for the record, and Ms. Pomerantz did not return

calls.

But Shanghai Tang isn't the only store feeling the squeeze. Rents

ranging from $500 to $600 per square foot–10 percent more than a year

ago–are deciding which stores are fit to be on Madison. Those without

deep enough pockets are closing, and newer, bigger, fancier stores are on

their way. Since January, Hermès, David Yurman and J.P. Tod's

have edged out the Limited, Nine West and Waterford Wedgwood. Donna Karan

will open two stores by next spring and Coach is tripling the size of its

store on the corner of Madison and 57th Street.

"It's all cyclical. If your cycle is up now, you are in big

trouble," said Robert Cohen, senior managing director at Robert K.

Futterman & Associates.

Despite the Shanghai Tang experience–much less the long shadow cast

by Barneys–everyone wants on Madison Avenue. Tommy Hilfiger, makeup

artist François Nars and fancy shoemaker John Lobb are all scouting

for space on the exclusive strip between 57th and 72nd streets.

"It is like an advertisement, especially for someone who wants

worldwide visibility," said Ms. Greenwald. "They figure, 'I

can do a color ad in The New York Times Magazine or I can take a

store.' Even if they break even, they are happy. It is about having a

presence."

"Bigger is better," said Faith Hope Consolo, a senior managing

director at Garrick-Aug Associates Store Leasing Inc. "Two levels are

a norm now, where it used to be unusual. It gives them the opportunity to

show off the whole line."

There were more than a dozen bidders when the lease was up on the

20,000-square-foot, four-story Limited flagship store on 62nd Street and

Madison–and its Victoria's Secret annex–last year. Rodney

Propp, who owns the building, rented it to Hermès in December,

turning down Donna Karan, Tommy Hilfiger, Trussardi and Hugo Boss.

"Off the wall," was all Mr. Propp would say about the offers

he fielded.

"I was interested in someone who is really stable," said Mr.

Propp. "They have absolute leadership and a 160-year operating history." Hermès has had a store at 11 East 57th Street, near Nike

and a block from Swatch and Levi's, since 1983, which it will close

before the move to a new space in the fall of 2000. "Let's face

it, 57th has really become Disneyland. Hermès was aware of

that.… They can't be next to people like that," Mr. Propp

said.

South American dressmaker Pilar Rossi vacated its boutique at the

southeast corner of Madison and 64th Street in March. The store's

lease ($500 a square foot for 1,500 square feet) was up after 10 years. The

company knew the rent would go up and decided they were unable to pay any

more. "They have a following," said Ms. Consolo, who brokered

Pilar Rossi's relocation. "They felt more than anything they

wanted to retain their presence on the avenue." Pilar Rossi is moving

to a 400-square-foot space near 65th Street, next door to Ungaro;

they've signed a 10-year lease for a little more than $500 per square

foot. "There were dozens of tenants for that store," said Ms.

Consolo. "They got it because they had been on the avenue for so

long."

Jeweler David Yurman will open his first store in the former Pilar Rossi

space. Mr. Yurman, whose heavy, twisted silver pieces sell at Bergdorf

Goodman and Bloomingdale's, also won out over other retailers, said

Ms. Consolo, because of "his tremendous brand recognition."

Nine West and Waterford Wedgwood, neighbors on 63rd Street and Madison,

both closed in February. Real estate agents expect Jones Apparel, which

just bought Nine West, to take over its space. The 3,500-square-foot

Waterford Wedgwood store will be taken over by Longchamp, a European

leather goods store for more than $10 million over 10 years.

Currently under construction near 59th Street is a J.P. Tod's

store–to be called Tod's–carrying a full line of shoes and

clothing, in the old Nordic Track space. Up near 68th Street at 821

Madison, a three-level, 16,700-square-foot Donna Karan store is under

construction. The lease has been valued at $30 million to $40 million. It

will open in the spring of 2000. Donna Karan also has a DKNY store under

construction on 60th Street and Madison, which, according to Patti Cohen,

senior vice president of communications at Donna Karan, will open in

June.

The stores currently leaving Madison are all stores "that

shouldn't be there anyhow," said Bud Konheim, co-owner of Nicole

Miller Ltd., which has been on Madison Avenue near 66th Street since 1986.

"Madison is a very, very strong shopping street," Mr. Kondheim

said. "If you are not high end in that location, there is a chance you

won't do well."

Retail experts believe that in most cases, stores on Madison Avenue

don't make money; breaking even is doing well. Still, many European

companies have their only American stores there–Etro, Les Copains and

Moschino. The name recognition and a tremendous amount of free publicity,

however, is invaluable. Hermès, for instance, has over 200 stores

worldwide and did $791.7 million in sales in 1997. Typically, the company

does only 15 percent of its business in the United States.

"If you are a high flier it doesn't matter," said Howard

Davidowitz, chairman of Davidowitz & Associates Inc., a national retail

consulting firm. "But if you fall on hard times … The rent is so

astronomical that making money becomes a difficult chore."

According to Richard Seligman, president of Retail Development Partners,

who leased the space to Shanghai Tang on behalf of the landlord, "It

takes a significant economic base and a well-established name to make that

kind of space work."

Shanghai Tang's owner and chairman, David Tang, 43, just had a

gimmick. Mr. Tang has been called an entrepreneur, a socialite and Hong

Kong's coolest designer. He is rumored to have been at Prince

Charles' 50th-birthday party. Mr. Tang comes from old money (his

grandfather was a Hong Kong millionaire), was educated in England and holds

a law degree. He made his first fortune selling Cuban cigars. Later he

gained fortune and fame with the China Club, a post-British-rule,

members-only eating club in Hong Kong where Asian businessmen strike deals.

In a 60 Minutes segment last May, Morley Safer said Mr. Tang is

"not quite the master of all he surveys, but he is trying."

More than anything, Mr. Tang wants a brand name–ideally, a mix of

Trump and Armani. In addition to his store in New York, there is a Shanghai

Tang in Hong Kong, another in Shanghai. They offer everything from

custom-made cheongsams (traditional Chinese dresses) for about $1,000 to

silk smoking jackets to Mao watches to chopsticks.

As a novelty, Shanghai Tang didn't seem to catch on. Said Mr.

Davidowitz, "You don't see anyone there. [Shanghai Tang is] a

bowling alley. There is a depression in China. The fashion is totally

wrong. This is a debacle. They had a great opening party and that was the

end. People took one look and one look only."

"Shanghai Tang has gone the way of Galeries Lafayette. They

don't understand the New York market," said one consultant to the

owners. "They have not addressed the American customer. Even the

tourists don't understand it! And they have done no advertising, which

is crazy."

The Limited Inc. could spread around the loss of a Madison Avenue

flagship–until recently. "The Limited has been shuttering

underperforming stores," said Mr. Propp, their former landlord.

"That was a corporate decision." Published reports said the

company is re-evaluating 125 stores nationwide.

"Over the last 18 to 24 months, things have gotten out of

control," said Mr. Cohen. "I don't think it is a good time

for anybody. I don't see these rents going much higher without having

some serious effect on retail on Madison."

Mr. Konheim said he won't give up Nicole Miller's lease.

"The problem is," he said, "if I sell out, where am I going

to go? It only makes sense to someone who is not doing well."

The shuffling is never-ending. Crystal maker Lalique is taking over the

space formerly occupied by Le Relais, on Madison and 62nd Street. The

owners of Le Relais will open a Mediterranean restaurant called Amaranth in

Arcadia's old space on 62nd, just off Madison, later this month.

Of the comings and goings, Ms. Consolo said, "It is very

natural."