In SAP Class Builder, I am trying to test ABAP classes. When I press F8, it doesn't show "Create Instance" menu item.

You can access Class Builder by using T-code: SE24 or via Repository Browser SE80 and navigate to class you want to edit.

You have to ensure that you set the below parameter to the public. It is also possible that your class implements an interface.

It is also possible that class implements an interface. You have to click on magnifying glass icon and you can execute both static and instance methods.