CANNES – A “$1.54 euro,” rising oil prices and a global credit crisis are all top concerns at the 18th annual MIPIM conference. The oft-repeated question for investors goes: If the U.S. gets a cold, will the European Union get pneumonia? A new report from CB Richard Ellis answers “no” to that question — for now — although European countries are not immune from the higher cost of capital and tighter lending practices.

So far, only the U.K. has been badly damaged by the credit crunch, with property values falling 4.17% in December 2007, an unprecedented rate and almost double the biggest monthly fall in the 1989-1992 downturn— 2.24%.

The increase in prime yields in the rest of Europe was fairly small through the fourth-quarter. One caveat: while transaction volume in Continental Europe in the fourth quarter of 2007 did not decline, many deals were negotiated in the first part of the year before the crunch.

“Our analysis of the global economy is that we will not have a recession,” said Ray Torto, global chief economist for CB Richard Ellis. “The world economy will grow much slower than it has over the last couple of years — by over 150 basis points — and it will be less backed by the emerging markets,” he said.

“Our assumption is that the irrationality that is going on in the financial markets will get solved over the next four to six months,” said Torto. The 2007 vintage of CMBS issuance, where the most lax underwriting occurred, is projected to reach a peak of just 50 basis points over the next 10 years, he noted.

Where did the money go in 2007? Despite reports about investment flows into Asia – it didn’t go there, said Torto. According to CBRE, while the estimated investable universe in Asia was 17.1% of the global total of commercial real estate, only 6.4% of investment capital flowed there. That is compared with 54.3% of investment flowing into the U.S., which makes up 33% of the global market, and Europe, which saw 37.5% investment flows in a universe of 35.8%.

“We now seem to have a Europe of two halves, but most European markets saw record levels of investment last year, and 55% of this was cross-border investment,” said Nick Axford, head of EMEA research for CB Richard Ellis. In 2007, European commercial real estate investment reached 246 billion euros, a 6.3% increase over 2006.

Separately, the U.K. saw a 9% decrease last year with investment slowing to 77.2 billion euros while other European markets saw a 15% increase in investment activity over the previous year. In the fourth quarter, those markets (excluding the U.K.) achieved a quarterly record of 44.8 billion euros.

Worth noting—four of the top 10 European markets for investment came from Germany—Frankfurt, Munich, Hamburg and Berlin. Once called the “sick man of Europe,” Germany enjoyed 57.5 billion euros in investment last year, 66% of which came from cross-border buyers. Perhaps a testament to its newfound health, German investors came in third place on the world stage for cross-border investment, just behind U.S. and U.K. investors. The three nationalities made up 71 billion euros of the 119 billion euro total of cross-border investment last year.

In 2008, however, equity will no longer be in the driver’s seat and the heady numbers of 2007 will be much harder to come by. “What’s going to drive commercial values going forward is no longer going to be falling cap rates but in fact what’s happened to the rental side of the market place,” said Torto.