At 2:30 a.m. in Cannes last Thursday, they were already 17-deep at the bar at the Hotel Martinez, the watering-hole of choice for Europe's property industry. The occasion was MIPIM, the annual week-long conference of the real estate industry - sponsored by the Reed-Midem organisation, professional conference organisers.

Never mind that the Nasdaq has fallen to its lowest levels since the Russian debt crisis of 1998 or that Germany's Neuer Markt is 80 per cent off its highs from last year.

Ignore that the FTSE All-Share index is off 20 per cent from last year and that even three successive rate cuts from the US Federal Reserve have failed to stem the tide.

This is property, and best of all, this is the property industry in Cannes, a town where all the women are slim and tanned and all the men have hair.

According to Reed-Midem, the property industry partied in Cannes last week like never before. Attendance at the conference was up 26 per cent over last year, and at a record since the conference was first established in 1993. Nearly 2,000 companies have taken stands at the conference to make their names known.

Even more, apparently, have trouped down to Cannes without having taken the trouble to register. Hotels in Cannes are fully booked and participants are staying as far away as Nice, 25km away, and in outlying towns such as Cap Antibes and Mandelieu.

Still worse, the demand for corporate yachts this year has been so great that every single berth is taken, according to the conference organisers. DTZ Debenham Tie Leung hired two.

Rotch Property, a UK-based investment company that habitually hires a yacht, had to hire a speed boat to ferry its guests back and forth to this year's model. Several have chosen to berth at the nearest bay further down the beach.

It is left to the Senegalese street vendors, arranging and re-arranging their baubles on bright green mats, to serve as a silent reminder that outside of Cannes lie war, pestilence and poverty.

How is it that the woes of the wider investment world can be shrugged off so easily by the property industry? Is there any reason to think that real estate is an asset class in a world of its own?

Jacques Gordon, director of international research at Chicago-based Jones Lang LaSalle Investment Management (JLLIM), says the answer to the last question, in some measure, is "yes".

Indeed, its low "co-variance" is the very quality that sets real estate aside as a separate asset class.

Co-variance is defined as the extent to which performance in one asset class correlates to movements in others.

Over the past 20 years, the direct US real estate markets have a -0.05 per cent correlation with the S&P 500 stock index, suggesting there is almost no relationship between the two, Mr Gordon says.

Indeed, the only asset class with which US real estate shows any positive correlation is cash. Three-month Treasury bills are 0.59 correlated with property.

Scott Malkin, chief executive of Value Retail, a development company specialising in factory-outlet centres across Europe, says property investors have good reason to celebrate in Cannes. "For years, these guys have been in the dungeon, completely overshadowed by returns on TMT stocks and bonds," he says. "Now they're getting their own back."

While technology, media and telecoms stocks collapsed towards the end of last year, property stocks soared. In the 12 months to mid-March, UK property shares have offered returns of 49.8 per cent above those of the wider market.

If stocks are compared with directly-owned real estate, property was the best performing asset class in 2000.

Typically the asset class that underperforms all others apart from cash, real estate is finally demonstrating its defensive qualities.

Moreover, in spite of the ructions in world stock markets, there are few signs that Europe's underlying economies have been hit. If anything, several European property markets are still emerging from the last property recession in the early 1990s and are just starting to come into their own. "No European capital has hit the peak rents of before the last recession," says Roger Orf, chief executive of Pelham Partners, an opportunity fund, noting that property values in these cities probably have some way to go yet.

Germany, in particular, is coming into its own, aided by tax reform and the unbundling of corporate real estate. Some 400 German exhibitors have taken stands this year, nearly double the number of two years ago.

Gerald Blundell, JLLIM's London-based head of investment strategy, agrees that property's co-variance is low, but notes there are limits. "As a commodity, it's fairly well insulated from stock markets in the short term," he says. "But in the long term, we are all in the same economy."

And on the Rotch yacht, another property executive muses. "Personally, I think the market is in great shape. There's no overbuilding. No speculative development . . ." But earlier in the day, his former boss, head of real estate lending at a UK-based bank stopped by.

"He looked at all the yachts," the executive recounts, "and he said `You know what? This looks like 1988. In six months time, I'm going to close my (real estate loan) book and go home. The bubble is about to burst."'