WE'RE LOUNGING IN

a window seat in a Short Hills, N.J., home. Sunlight dances on the granite-topped island before us. We've dimmed the brass-dome lights to better see the flat-screen TV. With the press of a button on the wall, light jazz streams from the ceiling's inset speakers. Not bad for a family room or kitchen, but we're actually in a closet, sitting between the Manolo Blahniks and matching hampers.

Americans are souping up their storage spaces. And it's no wonder: Anyone who has ever watched MTV's "Cribs" can attest that Imelda Marcos isn't the only one out there with a serious footwear fetish. As people haul ever more stuff into their houses and struggle to keep it organized, they're needing to "maximize their limited square footage," says Paul Boomsma, president of Chicago-based Luxury Portfolio Fine Property Collection. Enter the $4 billion custom-closet industry, which is transforming the old rod-in-a-box model into larger and more-sophisticated spaces. Closets are not only being decked out with smarter, swanker storage options think adjustable shelving, felt-lined compartments, glass-covered drawers but with furniture and entertainment components as well. (Wine refrigerators, anyone?) Custom systems are also spreading from the master bedroom's walk-in closet to other areas of the home, like the kitchen, home office and basement. Clients routinely spend $4,000 to $5,000 per closet, says California Closets' president, Anthony Vidergauz, although some will shell out five times that much to organize their stuff in style.

But as Americans supersize and customize their closets, the choices have gone far beyond whether to splurge for that motorized tie rack. Should you hire a custom closet company or a local contractor? And which are the smartest storage plays, versus the merely trendy? To get some answers we teamed up with a real estate agent from Lois Schneider Realtor in New Jersey to tour some seriously custom closets (owners requested anonymity). Along for the ride: Meryl Starr, professional clutter buster and author of "The Home Organizing Workbook."

Type "Custom Closets" into Google and the results seem endless. Do-it-yourselfers looking for an inexpensive solution ($750 and under) will find sites like EasyClosets.com (which markets itself through warehouse giant Costco) that ask you to plug in measurements, storage needs and aesthetic preferences online, and then will deliver the components for you to install. Prefer that a professional come to your home to design and build your closet? Full-service options range from individual designer/organizers working with local cabinetmakers to regional specialty-closet companies to national chains. California Closets, which sparked the custom-storage revolution 30 years ago, now has some 95 franchises nationwide. There are more than 2,000 closet companies in the U.S. (about 30 are national), and industry sales have doubled in the past five years, to $4 billion.

What's the difference between a national chain and your local cabinetmaker? When California Closets came to Nancy Gordon's Westchester, N.Y., home for an appointment, Gordon was impressed with the clear, 3-D computer imaging, something she didn't get from her neighborhood contractor. But whether you're dealing with high-end Poliform USA or the more modest wire-shelf provider ClosetMaid, the bigger outfits offer fairly standardized storage systems; don't expect too much handcraftsmanship. And customers have complained that when national franchises dispatch a designer to your house to provide a free estimate, it's usually a high-pressure sales pitch; like with car dealers, it pays to shop around and haggle.

On our New Jersey closet tour, we're learning what works and what doesn't. In Scotch Plains we visit an 8x11-foot master-bedroom closet, designed and installed by local Newfoundland, N.J.-based The Closet Depot for $6,500. Each compartment and shelf, made of 3/4-inch melamine with a fancy beveled edge, is anchored to the wall, which, according to our expert, Starr, translates to "high quality." Starr likes the closet system's chrome-steel elliptical rods (stronger than round ones) and the foot of free space between the ceiling and the crown molding, perfect for storing seasonal clothing. And while the system has plenty of compartments for various types of garments, Starr sees a design flaw: Some of the shelves don't leave enough space to hang folded slacks, causing them to bunch and wrinkle where they hit the bottom shelf.

Most closets have too much hanging space, says Starr, and not enough shelf or drawer storage. So don't skimp on shelves (the more adjustable, the better) or on functional basics like a hideaway laundry hamper or pull-down ironing board ($250). When it comes to lighting, make sure it's bright enough for you to tell blue socks from black ones. No room for a three-way looking glass? Substitute a space-saving pull-out mirror on a swivel arm. And if you're building storage in the basement, remember to do what we saw in one Summit, N.J., house: Start the shelves at least a foot above the floor, to limit the potentially ruinous effect of flooding.

On the really high end, many homeowners like to show off their shoe and jewelry "collections" by adorning their closets with almost museumlike features, such as slanted shoe shelves at eye level and glass-topped or velvet-lined drawers. Another hot trend: chaises and ottomans, convenient for putting on socks and shoes or reclining with that cup of morning java. But it's easy to blow your money at this level. Expensive mahogany cabinetry certainly creates an elegant look, but the dark wood tone can also shrink a closet's appearance, says Starr. And make sure that if you go for the flat-screen TV, you hang it at eye level; otherwise it becomes a very expensive radio.

The most extravagant closet we visited, in a $2.2 million Short Hills home, seems to have it all: a granite-topped island with five rows of Manolo Blahnik shoes on one side and five of Tod's on the other. Glass-covered drawers housing the wife's collection of Judith Leiber handbags and her husband's assortment of shiny cuff links. A brass-framed mirror, a lighting system, a flat-screen TV and a high-end sound system. Sitting in the window seat, Starr has found closet nirvana: a storage space that combines luxury, functionality and personal expression. "If only we could try on some of these clothes," she whispers.