Black Friday is around the corner. Will US shoppers head to the mall? Or are malls out of fashion for good? The debate about the retail apocalypse is playing out in a single bond index.

That index is the CMBX.6, which references 25 US commercial mortgage-backed securities (CMBS) issued in 2012 that have meaningful exposure to retail loans, including loans on regional malls. The narrative of the death of the mall has led many investors to “short” the CMBX.6. But we view that narrative as overly stark and simplistic.

What we see instead is a landscape that’s far more complex and nuanced. Our fundamental research reveals a sector in flux, with many regional shopping malls on the verge of failure while others are reinvesting and evolving to keep pace with changing consumer preferences.

To get a better perspective on the future of the American shopping mall, we need to begin with its history.

A Little History of a Big Industry

The indoor regional shopping mall with its department store anchor dates back to 1956 and the Southdale Center in Edina, Minnesota. With suburbs flourishing across the US, the concept spread like wildfire. Throughout the 1950s and 1960s, malls of all price points sprouted in every location in which strong demographics and household incomes supported them. Highly productive “class A” malls’ higher price points appealed to higher-income households. A middle-market customer base supported a “class B” mall.

Mall development slowed in the soft economy of the 1970s but resumed in earnest in the 1980s and 1990s, spurred by rapid real income growth, the tech boom and the ensuing demand for apparel and lifestyle brands. Private equity firms, which acquired retailers and expanded locations in pursuit of fast profits, added fuel to the fire.