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 December 31, 2003 and redeemed on December 31, 2013.
— TIAA Real Estate Account	$15,988

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

Real estate market conditions remain solid amid steady economic growth

The U.S. economy continued to grow at a modest pace during the fourth quarter of 2013. According to the Bureau of Labor Statistics, 515,000 new jobs were added during the quarter, compared to 502,000 in the third quarter of the year. All in, the U.S. economy added nearly 2.2 million jobs in 2013. The unemployment rate fell from 7.2% at the end September to 6.7% at year-end. However, much of this decline can be attributed to a contraction in the labor force.

Employment trends in financial and professional and business services serve as a primary driver of office space demand. During the fourth quarter, financial services added 14,000 new jobs, compared with 10,000 in the third quarter. Meanwhile, the professional and business services sector continued to expand as well, adding 112,000 new jobs versus 124,000 in the previous quarter.

Office market conditions improved further. According to CB Richard Ellis Econometric Advisors (CBRE-EA), a frequently cited source for real estate market data, the national office vacancy rate ticked down to 14.9% at year-end, compared with 15.1% last quarter. The improvement was broad-based across the nation as vacancy rates fell in 44 of the 63 markets tracked by CBRE-EA.

Industrial markets conditions continued to make significant headway in the fourth quarter. Based on preliminary data from CBRE-EA, the national availability rate declined to 11.3% compared to 11.7% in the third quarter. The industrial availability rate has now declined in 14 consecutive quarters. All in, availability rates declined in 48 of the 61 markets tracked by CBRE-EA. While an increase in construction may temper future gains in some industrial markets, new supply is not expected to interrupt the overall progress of the sector as demand remains strong.

The ongoing recovery in the apartment market sector continued in the fourth quarter as well. Preliminary data from CBRE-EA indicated that the national vacancy rate was unchanged at 5.0% vs. the year-ago period. (A year-over-year comparison is necessary to take into account the effects of seasonal leasing patterns in the apartment sector.) Effective rent growth averaged 2.5%-3.0% across most markets, while many West Coast markets saw rental increases of 5%. Meanwhile, other major markets, including Washington, DC and New York experienced more modest increases.

Preliminary estimates from the U.S. Census Bureau indicated that retail sales (excluding motor vehicles and parts) increased 1.0% in the fourth quarter compared with last quarter. Spending on clothing, furniture and sporting goods rose but was largely spurred by discounts. The national retail availability rate declined to 12.0% during the quarter, versus 12.3% in the previous quarter as retailers leased space in anticipation of the holiday season.