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.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.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, 2006 and redeemed on June 30, 2016.
— TIAA Real Estate Account	$14,438

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 Improve Further Despite Global Economic Uncertainty

The Bureau of Labor Statistics reported that the U.S. economy added 442,000 jobs during the second quarter of 2016 compared to 587,000 jobs during the first quarter of 2016. Job gains were unexpectedly weak in May but rebounded strongly in June. All major sectors expanded during the quarter except for mining and construction. The unemployment rate increased 0.2 percentage points in June to end the quarter at 4.9% as the labor force grew.

Finance and professional and business have been the traditional drivers of demand for office space. During the second quarter, job growth in both sectors accelerated. The financial services sector added 51,000 jobs as compared to 39,000 in the first quarter while professional and business services employment increased by 113,000 as compared to 64,000 previously. As a result, the national office vacancy rate declined to 13.0% during second quarter from 13.1% previously, and is now approaching the previous cyclical low of 12.4%, which occurred in the second quarter of 2007. Vacancy rate improvements were broad-based, with declines in 38 of the 63 markets tracked by CB Richard Ellis Econometric Advisors (“CBRE-EA”).

Industrial market conditions improved for the 25th consecutive quarter, with the national availability rate declining to 8.8% from 9.0% in the first quarter. CBRE-EA notes that industrial market conditions have benefited from growth in e-commerce as demand for high quality warehouses in close proximity to major metropolitan areas has increased dramatically. While availability rates declined in 36 of the 59 markets tracked by CBRE-EA, construction has increased significantly in a number of markets. Consequently CBRE-EA expects availability rates to decline more gradually over the remainder of 2016 and into 2017 as new supply is delivered.

Preliminary data released by CBRE-EA indicate that the national apartment vacancy rate inched up to 4.4% in second quarter 2016 as compared to 4.3% in second quarter 2015. (Year-over-year comparisons are necessary due to seasonal leasing patterns.) The increase in the national vacancy rate, albeit small, was the first since late-2009. Nonetheless, apartment demand remains robust, supported by the healthy labor market. With construction not expected to peak until late- 2016/early-2017, however, CBRE-EA is expecting rent growth and vacancy improvements to moderate further over the remainder of 2016.

Retail sales growth remained modest during the second quarter. Preliminary data from the U.S. Census Bureau indicate that retail sales excluding motor vehicles and parts increased 1.7% compared to first quarter 2016 and 3.0% compared to second quarter 2015 sales. Stronger retail sales contributed to a decline in the national retail availability rate to 10.9% from 11.0% in the first quarter. While ongoing job gains should ultimately spur more meaningful wage growth and stronger consumer spending, household savings rates have increased and the retail industry remains highly competitive. As a result, further, albeit modest, improvement in retail market conditions is expected during second half 2016.