Office landlords can't help but cringe when the countywide vacancy rate rises, as it did during the first quarter of this year.

But some real estate analysts and leasing agents say the Charlotte area market might be stronger than vacancy totals indicate.

"I'm very encouraged with the level of activity we've seen over the past six months," said David Bailey, executive vice president of Commercial Carolina Cushman & Wakefield in Charlotte.

"There are lots of small deals out in the marketplace looking for space," he said. "We're seeing a lot of new companies that have not been in Charlotte and some that left and are coming back."

Karnes Research managing partner Andrew Jenkins said, "Brokers once overlooked the 5,000 to 10,000 square foot deals, but nowadays they're going after them."

It takes a lot of small leases to affect the vacancy rate. But a couple of large departures or the addition of one large new building can swing it significantly, he said.

That's what happened in the first quarter while brokers were busy doing those 5,000-, 10,000- and 15,000-square-foot deals.

Two suburban office parks lost tenants occupying about 100,000-square-foot each, and about 100,000 square feet of new space was completed countywide.

Up went the vacancy rate.

That was confirmed by both Karnes Research and Carolinas Real Data, which rely on slightly different methodologies.

Karnes Research pegged the first-quarter rate at 14.6 percent, up from 14.2 in the fourth quarter, and Carolinas Real Data figured it at 15.6 percent, up from 15.3 percent in the fourth quarter.

Karnes Research said countywide office vacancy rates peaked at 17.9 percent during the early 1990s recession.

Both firms counted more than 5.5 million square feet vacant countywide in the first quarter.

If demand continues at current levels and no major new office buildings are started, Jenkins said, landlords should be able to reduce the oversupply over the next couple of years.

"There are not a lot of large chunks of space available in the suburban market anymore," Bailey said. "Finding anything over 10,000 square feet is more limited than it was a year ago."

Justin Hunt, vice president of headquarters and international development at the Charlotte Chamber, said, "I never think in terms of the local vacancy rate. I think in terms of space a client can use."

While landlords prefer to see every square foot occupied, the chamber says having large blocks of space to show corporate relocation prospects improves chances of attracting them.

Companies that have made a decision to move typically want to do so quickly without waiting for an office building to be constructed.

Hunt said the chamber is talking with several out-of-town companies about relocation.

"The uptick in activity we're seeing isn't as fast as we would like to see," he said, "but it is happening."

Analyst Brett Hicks, writing in Carolinas Real Data's first quarter office report, said the war in Iraq and negative economic news stunted what looked like a promising start to the year.

"Leasing activity during January and February was stronger than activity at the end of 2002," he wrote. "However, activity lessened significantly in March (after the war started)."

Real estate forecasters don't expect the Charlotte market to regain pre-recession momentum until 2004, when economists say job generation and business expansion could pick up.

Jenkins said the Charlotte area would be positioned to benefit from such an upswing, thanks to its nationally competitive office rental rates and available labor pool.

He and other analysts believe the city will have to look for corporate tenants other than Bank of America Corp. and Wachovia Corp. to fill about 1.3 million square feet of vacant space in the center city.

During the late 1980s and 1990s, the banks' nearly insatiable appetite for space fueled an office tower boom, but over the past two years they have been consolidating office space uptown.