To be honest I see a strong swing towards co-working spaces in Sydney, I have noticed many business owners are pushing for that type of business operation. 

Virtual offices are still great but, I recently attended an event at Servcorp (fantastic virtual office) and even met some Savvy SME members. 

I think a lot of people still find it a novelty Neil. I will qualify my comments as being biased - we provide serviced offices and virtual receptionist services - my target market is businesses who are already comfortable with the concept.  I can tell you though that the acceptance and awareness of virtual workplaces is better now it was 5 years ago. I live 3 hours from Brisbane and have staff working both in the offices (based in Brisbane) and at their own homes so I practice what I preach when it comes to virtual offices. My personal experience is that many people are reluctant to meet virtually, preferring to have a face to face. I've had 'those' calls from the technology companies who are keen to have their 'Business Analyst' meet with you about getting your technology in order, but they refuse to schedule a Skype meeting or Google Hangout - go figure.  Many of my clients are comfortable with it all, as you would expect, but for them, if they need face-to-face I will either get in the car and go see them, or one of the team will.  My approach is to continuously sell the benefits, of which there are many, and be prepared to compromise on occasion. I strongly believe that broader acceptance of virtual workplaces is an evolutionary process and if we just keep doing what we're doing, other businesses will eventually catch on. 

I still think the traditional office is relevant for a lot of larger companies but I think the real value in the new trend of virtual office is more about flexibility. For me the downside of the traditional office is not the location itself but the requirement to be there. I personally believe that adults that are committed to a company should be allowed to make a choice as to how they will work most efficiently. There are some type of projects that will be more efficient face to face and whether this is done in a coffee shop or in an office it doesn't matter. In addition there are some projects where people work better in a quieter environment with no interruptions (e.g. workmates) and they should be given the flexibility to go sit in a quite area or coffee shop or even at home to complete the task.

I think the ideal situation will be a mix of both worlds. Days where you may physically meet people and days where you can do the hard tasks that require absolute focus and quite and no interruptions.

I personally love the idea of co-working spaces for smaller startups because it gives them the access to a bunch of people with various skills that you don't have to hire for - like asking the designer sitting across the table from you their opinion on one of your banners, and you can come in and out of the co-working space as you please. I think that's the best of both worlds for startups and smaller businesses and removes the isolation :)

Even some of the larger start-ups that have outgrown the co-working spaces choose to stay near or continue working in co-working spaces because you just get access to a bunch of amazing motivated entrepreneurs :)