Scott Lamontagne, managing director, Austin, TX: The middle market segment is comprised primarily of older assets being sold to value oriented groups who typically engineer returns through rehabilitation. The value-add segment has seen the strongest amount of market interest throughout the entire current cycle. As we enter into the latter stages of the market cycle, value-add opportunities remain popular partially due to the void of current transactional inventory available. This lack of supply coupled with significant rental increases and rapid escalation of pricing has enticed a lot of investors. Given the rapid run up in pricing, most of the assets that could be sold have been, leaving only those assets that are waiting out onerous yield maintenance or defeasance penalties, and those owned by preservation capital with ultra-long term horizons.

Darcy Miramontes, managing director, San Diego: We are seeing a lot of aggressive private capital chase mid-market deals across Southern California. The entire multifamily market continues to be very strong, with more capital flowing into the sector. In San Diego, demand is driven by the rock solid fundamentals; nearly 50% of the population rents, we are adding 30,000 people annually and only building approximately 3,000 multifamily units. The pace of new supply isn't keep up with resident demand, and almost all of those units are larger, luxury buildings and don't compete with them middle market buildings.

Travis D'Amato, managing director, Boston: The middle market was very active in 2016 and we expect similar activity in 2017. Private investment dollars from high net worth investors and smaller regional players have been able to invest at a yield premium to larger, more institutional deals.

GlobeSt.com: What is driving investment of middle market multifamily deals in your region?

Austin: The drivers of middle market investment in Houston have been private investors, plus the rental pricing difference between the class A and A+ rent structure and the existing class B, upgraded property. There is still a sufficient delta in pricing between the two market rents and there is room to upgrade and raise rents in an overriding concessionary market.

Lamontagne: As we came out of the great recession, there was little in new supply to meet the burgeoning demand and consequently investors quickly turned to value-add to fill the void. As the cycle progressed, class A luxury rents rose at such a brisk pace that a significant asset class gap occurred where class A rents far exceeded class B and C. This allowed for savvy investors to acquire older assets and significantly raise rents by infusing capital into modernization plans. In many cases we have seen assets double in value in just a few short years. Given the amount of success that we have seen in the Texas market in this sector, there has been a strong migration of capital into the area as investors are eager to capitalize on our market conditions.

Miramontes: From regional syndicators to private families, this mid-market capital typically targets properties that are too large for the mom and pops and too small for institutions. As a result, it's not as competitive and there is more opportunity. This type of private capital is often taking a long term approach to ownership with both turn-key and value add assets. San Diego continues to be one of the best performing markets, and with limited new supply, this is only projected to strengthen.

D'Amato: The majority of these deals have been in the class B space, whether urban or suburban. These markets have seen significant rent growth as new product cannot be built at today's costs and charge the same rent as slightly older assets. This rent spread has allowed investors in the middle markets to enjoy strong going in cash-on-cash yields, with strong growth projections even in the Boston metro, one of the most expensive submarkets in the country.