All else being equal, for team-based, creative, knowledge work, having everyone collocated is more productive.
But not all is equal. You can't necessarily attract the all the talent. It doesn't scale without extremely disciplined organizational and physical space design - working remotely in the office, is the more common norm. Your team is spread over different locations and buildings anyway so you aren't really working locally in practice. Strong communication and collaboration practices are what dominate - so just having people together in one place and expecting osmosis doesn't beat good async tooling and discussion practices (like those from the best OSS projects).
But not all is equal. You can't necessarily attract the all the talent. It doesn't scale without extremely disciplined organizational and physical space design - working remotely in the office, is the more common norm. Your team is spread over different locations and buildings anyway so you aren't really working locally in practice. Strong communication and collaboration practices are what dominate - so just having people together in one place and expecting osmosis doesn't beat good async tooling and discussion practices (like those from the best OSS projects).