Portfolio Strategies

This variable annuity account seeks favorable long-term returns primarily through rental income and appreciation of real estate and real estate-related investments owned by the Account. The Account will also invest in non-real estate-related publicly traded securities and short-term higher quality liquid investments that are easily converted to cash to enable the Account to meet participant redemption requests, purchase or improve properties or cover other expenses. The Account intends to have between 75% and 85% of its net assets invested directly in real estate or real estate-related assets with the goal of producing favorable long-term returns. The Account’s principal strategy is to purchase direct ownership interests in income-producing real estate, primarily office, industrial, retail and multi-family residential properties. The Account may also make foreign real estate investments. Under the Account’s investment guidelines, investments in direct foreign real estate, together with foreign real estate-related securities and foreign non-real estate-related liquid investments may not comprise more than 25% of the Account’s net assets. The Account will invest the remaining portion of its assets (targeted between 15% and 25% of net assets) in publicly traded, liquid investments.

Learn More

For more information please contact:

800 842-2252

Weekdays 8 a.m. to 10 p.m. ET,

Saturdays 9 a.m. to 6 p.m. ET,

or visit tiaa-cref.org

Performance

The returns quoted represent past performance, which is no guarantee of future results. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your mutual fund shares. For current performance information, including performance to the most recent month-end, please visit tiaa-cref.org, or call 800 842-2252. Performance may reflect waivers or reimbursements of certain expenses. Absent these waivers or reimbursement arrangements, performance may be lower.

Hypothetical Growth of $10,000

The chart illustrates the performance of a hypothetical $10,000 investment on June 30, 2004 and redeemed on June 30, 2014.
— TIAA Real Estate Account	$16,219

The total returns are not adjusted to reflect sales charges, the effects of taxation or redemption fees, but are adjusted to reflect actual ongoing expenses, and assume reinvestment of dividends and capital gains, net of all recurring costs.

Market Recap

US economy back on track, real estate market fundamentals maintain momentum

The U.S. economy appears to have gained momentum in the second quarter following a disappointing first quarter when Gross Domestic Product (GDP) declined 2.9%. The Bureau of Labor Statistics reported that 816,000 jobs were added during the second quarter, a sizeable increase from first quarter’s 569,000 jobs. Job gains were broad-based and even the government sector contributed to growth. Overall, monthly job growth averaged a robust 272,000 during the quarter which contributed to a decline in the unemployment rate to 6.1% as of June, the lowest rate since 2008.

Job growth among office-using employment sectors such as finance and professional and business services contribute to the demand for office space. More recently, the high-tech industry has also become a key demand driver but is more difficult to quantify because it spans employment sectors as diverse as manufacturing, information and professional and business services. Financial services employment increased strongly during the quarter; 34,000 jobs were added as compared to 9,000 during first quarter 2014. Growth in professional and business services also accelerated; 197,000 jobs were added as compared to 178,000 previously.

The labor market’s strong performance supported a decline in the national office vacancy rate to 14.5% from 14.8% in the first quarter as reported by CB Richard Ellis Econometric Advisors (CBRE-EA). Vacancy rate improvements were wide-spread across the country, but tech- and energy-oriented markets generally recorded the strongest improvements. Overall, vacancy rates declined in 45 of the 63 markets tracked by CBRE-EA.

The national industrial market similarly benefited from the increase in economic activity. Preliminary data from CBRE-EA indicate that the national availability rate declined to 10.8% in the second quarter from 11.1% previously. This represented the 16th consecutive quarterly improvement for the sector. Overall, availability rates declined in 42 of the 61 markets tracked by CBRE-EA.

Apartment market conditions continued to strengthen when the national vacancy rate declined to 4.4% from 4.6% in the second quarter of 2013. (The seasonality inherent in apartment leasing dictates a year-over-year comparison). The annual average vacancy rate has trended well below the 20-year historical average and rents have surpassed their pre-recession peak in many markets. Together these factors have triggered an increase in construction nation-wide.

Retail sales appear to have mostly recovered in the second quarter following the harsh winter weather of the first quarter. Retail sales excluding automobiles and parts increased 1.8% during the second quarter as compared to the first quarter and 3.5% compared with second quarter 2013. National retail market conditions continued to slowly improve during the quarter when the availability rate among neighborhood and community centers ticked down to 11.7% from 11.9% previously.