The top 20 countdown.

• Author: McMillan, Alex Frew
• Position: Largest real estate development projects in North Carolina

The drop in vacancy rates is a big hit with developers. Here's a list of their largest projects this year.

Construction's cyclical climate can change as fast as the seasons, but in the last two years, the sun's been shining for developers and contractors. And April, Eric Karnes says, was the kindest month in a long while.

"Office-space construction is the highest it has been in about five years," he notes. That's because the demand is there. Since Charlotte-based Karnes Research Co. started tracking the Queen City's office market seven years ago, April's 8.3% vacancy rate was the lowest on record.

Occupancy was even stronger in the Triangle and especially Research Triangle Park, which Raleigh-based Carolantic Realty reported had just 5% vacancy in office and multipurpose space in mid-1995. The Triangle hovered around 7% vacancy in all categories. "Make hay while the sun shines!" urges Carolantic's 1995 report. Winston-Salem-based consultant Bell & Gardner tracked office and industrial vacancies for Forsyth County at 6.5% and 9.8% in April. Rick Bell estimates those rates are 9.5% and 7% for Guilford County.

Office building has been tentative. But with Charlotte office rental rates up - to $19 a square foot, Karnes says, from what had been $16 or $17 for top-notch, Class A property - construction is gathering steam. "So far, fortunately, it's under the level of demand for the rest of the year," he says.

The building boom first hit in Charlotte's warehousing and industrial market. Vacancies, at 9.3%, are now slightly higher than in the commercial market, and 2 million square feet of multitenant warehousing is going up in and around the Queen City, which would test any market. "Everyone's going to be watching that with baited breath to see if there is demand," Karnes says.

Even with occupancy high, sure things still find much more favor than speculation. In the Triangle, financing is no easier to get than a few years ago, and there are "still substantial pre-leasing requirements" for potential projects, says Carolantic Realty President Carlton Midyette. "I think the projects that should go up will go up. But it's not easy to be promiscuous." Because of the airport, RTP and Interstate 40, western Wake County has seen some good office-space growth. And The Wall Street Journal reports that Raleigh-Durham has a million square feet in office space under construction. That haymaking might be good, but there's no comparison to the heyday of the mid-'80s, Midyette says. As in Charlotte, it's industrial space that sprouted first.

"There has been very good demand in the past few years, but there has been a lot of product come on the market just lately," he says. "So I expect that market will be tested in the next 12 to 18 months."

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Industrial space might be hotter because builders have been burned before on office space. There was more of a glut in offices when things went bad, says Thomas O'Brien, CB Commercial Real Estate Group Inc.'s Charlotte-based regional manager. "Values had dropped pretty precipitously in '90 to '92," he says. But North Carolina's economy has recently outpaced the nation's, making the state attractive for relocations. As the market firms up, investors will become more confident. Build-to-suit projects will likely give way to speculative development. Current demand is strong, O'Brien says, and he doesn't see that changing near-term. "I would expect that for the next three years we'll have continued health," he says.

BUSINESS NORTH CAROLINA's list of the largest construction projects in the state also shows heavy activity in retail, with two malls going up in the Queen City and Crab-tree Valley Mall expanding in Raleigh.

To compile the list, BNC interviewed developers, contractors, architects, chamber of commerce executives, economic-development heads, officials of councils of government, issuers of building permits and industry watchers. Each of the regional partnerships and commissions also got a letter asking for assistance. No project was included that had been listed in previous years, and projects had to break ground between Jan. 1, 1994, and June 15 this year or be completed in 1995.

Sometimes constructing a good list seems as difficult as constructing a $100 million office park. First off, you need a good foundation, and second, you've got to know where everything's going to go.

So one of the toughest parts of putting together BNC's list was deciding just what pieces to include and where. With a big project like Carolinas Stadium, last year's largest endeavor, it's obvious. But with new factories and warehouses running total tabs of more than $50 million, even up to $150 million, it gets tricky. The cost often includes expensive machinery, sometimes...