1. ABSTRACT Employment (Firm) location is a significant issue in urban planning. The importance of firm location stems from its significant contribution to the overall movement of people, mainly employees and goods in the urban area as well as from the importance and visibility of employment buildings for city form. One of the biggest problems in modelling firm location is that firms are very heterogeneous in many dimensions (firm size, function of the firm, whether the firm has business establishments etc.). Arguably the limitations that this presents to modellers are the main reason for the relatively small number of firm location modelling efforts, to date. Despite the high heterogeneity of firms, many of the existing models dealing with firm decisions regard them has a single phenomenon to be modelled, with market segmentation only according to industrial affiliation of the firms. Moreover, firms are usually theorized to have perfect information both about their production function and about the location availabilities in the market. However, those assumptions are often not realistic since office firms usually have only limited knowledge about their production function, since inputs and outputs of offices are fuzzier than those of manufacturing units. Furthermore, small firms, of all functions, usually lack the resources to systematically evaluate all the possible locations of the urban areas, and therefore could not be theorized to have perfect knowledge of the vacancies market. Hence, they are theorized to focus on a limited number of pre-chosen areas. The aforementioned has two important implications to research into firm location decision making. First, it indicates that a potentially fruitful approach to firm location modelling would be to introduce a higher level of market segmentation into the model system as a way to overcome the heterogeneity of the studied phenomenon. Second, it suggests that small office firms have a more satisficing behavior than an optimizing one, when searching for a new location. Therefore, it would seem as though the random utility modelling system is less adequate to model their location search than the rule based approach. The research presents an effort to model the small office firms segment separately from other kinds of firms as a way to at least partially avoid the heterogeneity problem. The research involves modelling in a microsimulation environment and revolves around an effort to model firm location decisions in a behavioral way. The microsimulation process will enable us to “follow” each firm while trying to mimic the way firms make their location decisions. Location Decisions of Small Office Firms: A Conceptual Model I. Elgar and E. J. Miller Work Plan and Data Requirements The next phases of the research: First a farther development of the conceptual model has to be done. The development will mainly include elaboration of the stages that are now presented in the conceptual model. Second a survey will be planned and done among small office firms in the GTA. The aim of the survey will be to learn what the main stresses for relocating are for this sort of firms. In addition the survey will check what the most important location variables are for the firms and how firms decide where to look for possible locations. A third stage of the work will be the data analysis that the survey will provide. That data will be of both qualitative as well as quantitative nature and will enable better understanding of small office firm behavior. The next phase of the project will involve supply data of location availability in different areas of the GTA. These will provide us with the ability to get a better view of the choice set that each firm faced when considering to make its location decision. The data from the survey combined with the supply data will facilitate the construction of a rule based model for relocation of firms. After the model is done there will be a stage of model verification were the forecasting abilities of the model will be compared to actual firm decisions.