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

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 March 31, 2004 and redeemed on March 31, 2014.
— TIAA Real Estate Account	$16,038

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.

Please refer to the next page for important disclosure information.

Market Recap

Despite challenging weather conditions, real estate market conditions remain solid

An unusually harsh winter somewhat slowed U.S. hiring during the first quarter of 2014, particularly in January. Despite the challenging weather conditions, 533,000 new jobs were added in the quarter according to the Bureau of Labor Statistics, compared to 595,000 in the fourth quarter of 2013. During the first quarter, 177,000 new jobs were added on average per month. Employment growth of this magnitude is considered adequate to provide jobs for new workers entering the workforce. Consequently, the unemployment rate ended the first quarter where it started, at 6.7%.

Employment trends in financial and professional and business services serve as a primary driver of office space demand. Job growth accelerated slightly across both sectors in the first quarter. The financial services sector added 9,000, compared with 5,000 in the fourth quarter. Meanwhile, the professional and business services sector continued to expand as well, adding 187,000 new jobs versus 142,000 in the previous quarter. According to preliminary data from CB Richard Ellis Econometric Advisors (CBRE-EA), a frequently cited source for real estate market data, the national office vacancy rate ticked down slightly to 14.8% in the first quarter, compared with 14.9% at year-end 2013. Vacancy rates declined in 34 of the 63 markets tracked by CBRE-EA.

Industrial market conditions also continued to display modest improvements in the first quarter. Based on data from CBRE-EA, the national availability rate declined to 11.1% compared with 11.3% at the end of 2013. This marked the smallest quarterly rate decline in more than a year and suggests a maturing recovery in the industrial space. Further, higher levels of new supply are being delivered in many markets for the first time since the start of the recession. Nonetheless, availability rates declined in 41 of the 61 industrial markets tracked by CBRE-EA.

The apartment market cycle also showed increasing signs of maturity in the first quarter. The national vacancy rate declined to 4.9% in the first quarter, versus 5.1% in 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 remained steady at 2.5%-3.0% across most markets. Rents continued to climb in many tech-based areas while rents in smaller markets and Washington, DC struggled to gain traction.

Exceptionally harsh winter weather had an impact on retail sales. Retail sales (excluding motor vehicles and parts) increased 0.2% in the first quarter compared with year-end 2013. Weaker winter sales contributed to a smaller-than-anticipated decline in the national retail availability rate to 11.9% during the quarter, versus 12.0% previously. Nonetheless, this marked the first time the availability rate fell below 12.0% since 2009.