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 expense needs. 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 accumulation units. 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 December 31, 2005 and redeemed on December 31, 2015.
— TIAA Real Estate Account	$15,118

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

Solid job growth bolsters real estate market conditions

Employment growth solidified during the fourth quarter of 2015 when the Bureau of Labor Statistics reported that 851,000 jobs were added as compared to 521,000 jobs during the third quarter. Growth during the quarter was broad-based; only the mining sector contracted in response to ongoing weakness in oil prices. Job growth accelerated during the fourth quarter to average 280,000 per month, more than enough to absorb new entrants into the labor force. For 2015 as a whole, the U.S. labor market added nearly 2.7 million jobs compared to 3.1 million in 2014. The unemployment rate ended the year at 5.0%, down from 5.6% at year-end 2014.

Employment in both major office-using sectors expanded again in the fourth quarter. The financial services sector added 37,000 jobs as compared to 32,000 during third quarter while the professional and business services sector added 188,000 as compared to 107,000 previously. Finance and professional and business services have been the traditional drivers of office space demand; more recently, robust demand from technology and media firms has supplemented growth in major markets. Accelerating job growth contributed to the 23rd consecutive quarterly improvement in office market conditions. According to CB Richard Ellis Econometric Advisors (“CBRE-EA”), the national vacancy rate ended 2015 at 13.2% as compared to 13.4% during third quarter. Vacancy rates declined in 42 of the 62 markets tracked by CBRE-EA.

Industrial market fundamentals are driven by consumer spending, industrial production, and international trade. While manufacturing and exports slowed due to the stronger dollar, industrial markets benefited from healthy consumer spending and growth in imports. As a result, industrial market conditions improved further with CBRE-EA reporting that the national availability rate declined to 9.4% during fourth quarter as compared to 9.6% previously. Tight market conditions have led to an increase in construction, but CBRE-EA notes that new space is needed to satisfy growing demand in many markets.

The national apartment market tightened further during the fourth quarter as the national vacancy rate ticked down to 4.6% from 4.7% during fourth quarter 2014. (Seasonal leasing patterns necessitate year-over-year comparisons in vacancy rates.) Vacancy rate declines have continued despite increasing construction in many markets. While demand remains strong, vacancy rates are likely to be approaching cyclical lows with construction peaking in the second half of 2016.

Retail sales were lackluster during the important holiday season. Preliminary data from the U.S. Census Bureau indicate that retail sales excluding autos and auto parts were essentially flat compared to third quarter 2015 and up only 0.7% compared to fourth quarter 2014. Similarly, retail market conditions improved modestly in the fourth quarter when the national availability rate ticked down to 11.2% as compared to 11.3% previously. CBRE-EA notes that lower gas prices, a strong job market, and improved credit availability should support stronger retail sales growth and more meaningful improvements in availability rates in the future.