Chief investment officer Patrick Armstrong is betting some global commercial real estate stocks will slide further. Armstrong, who manages equity strategy at wealth manager Plurimi, told CNBC Pro on Monday that he has short positions in London-listed British Land, U.S.-listed Simon Property, Frankfurt-listed Vonovia and Hong Kong-listed Vanke. Investors with short positions benefit when stocks fall. They do this by borrowing shares from other investors and selling them immediately; they then buy them back when the price is lower, at a profit. The strategist believes commercial real estate stocks are overvalued even at current levels due to lack of demand and rising borrowing costs. “Working from home reduces the demand for office properties and it reduces the demand for city properties,” Armstrong said. “Online shopping reduces demand for malls — so we’re short a lot of real estate companies.” valuation. Earlier this month, veteran investor and Warren Buffett partner Charlie Munger said he believed “trouble” lurks ahead in the U.S. commercial real estate market. Meanwhile, the European Central Bank warned in April that there were “clear signs of fragility” in the housing sector, citing “declining market liquidity and price adjustments” as sources of uncertainty. British Land Negative sentiment can be seen in the share price performance of property stocks. Shares in British Land, for example, are down about 10% this year and are still down by more than a third from pre-pandemic levels. The firm also acknowledged the trend and cut the value of its portfolio by 12.3 percent to 8.9 billion pounds ($11.1 billion) last week, sending its shares lower. However, Armstrong expects further falls. “British Land’s NAV has fallen more than most analysts expected and I don’t believe valuations have bottomed out,” he said. “In my opinion, it’s a costly company facing a very toxic environment.” Armstrong is not alone in his pessimism about British soil. The hedge fund has raised gross short interest to 2% of the company’s free float from 0.7% at the start of the year, according to disclosures to U.K. regulators. British Land did not respond to CNBC’s request for comment. BLND-GB 1Y Line The diversified 167-year-old company manages 21.3 million square feet of commercial real estate across three office buildings, a retail park and a logistics center. However, Armstrong said its concentration in central London made it a “growth headwind”. “In London, vacancy rates are likely to continue to rise. New supply is increasing and demand is decreasing,” he added. He said he would close out his short position in the company “if the stock fell another 15% … assuming a similar interest rate environment.” Close to “fair valuation”? However, economists at London-based consultancy Capital Economics are more optimistic about the commercial real estate sector. They point out that while real estate stocks overall look overvalued, this is largely due to the fact that industrial real estate valuations remain significantly higher. “Indeed, offices and retail are now at or very close to fair value,” Matthew Pointon, senior real estate economist at Capital Economics, said in a May 17 note to clients. We suspect that industrial yields will need to rise further this year.” Meanwhile, European real estate company Vonovia has also made it to Goldman Sachs’ list of “strong buy” stocks this year. Wall Street banks expect it to rise to 37.30 euros ($40.20) over the next 12 months, giving it a potential upside of nearly 115%. The stock is also part of the investment bank’s “High Dividend Yield” and “Value Buy” stock screens.