I don't think it's necessary for the trust factor. However, under the new business name registration system in Australia, it is mandatory to list a physical address for service (i.e. the address for all correspondence about your business name etc). And, this physical address will be published on a public database. So, if you are a sole trader operating from home you may wish to investigate other options such as a virtual address for online businesses. You can use for this purpose rather than have your residential address published. 

An office is 'expected' by many clients, but that view is slowly changing. I have sometimes received surprise when someone learns that I do not have an office but go to their premises, a coffee shop or even the back seat of a car, but of course mainly working from home. SMEs are particularly understanding, as they too often avoid the cost of an office.

The expectation of an office also depends upon the industry in which you are working. There is already general acceptance that many of those working in IT and social media are less likely to spend all day in an office - because it is not necessary. However it is still a bit of a leap for some to have the same acceptance of other industries that have traditionally been in offices to now work without one.

It is a trend that is coming, and I believe will be well accepted within a few years.

I have an online business and the address I give for customers is a PO Box.  Didn't want to broadcast to the world my home address.

There are also some great places that offer you a virtual address for online businesses anywhere in the world for a small monthly subscription fee. You can also apply for local landline phone numbers via skype for a monthly fee as well and receive the calls via skype. 

Looking like a traditional business no longer requires you to be physically there, which is great.

If you are looking for virtual offices here are a few place to start looking:

http://www.servcorp.com.au/virtual-offices/address 

http://virtualheadquarters.com.au/services/virtual-address 

http://www.regus.com.au/products/virtual-offices/virtual-office-bundles.aspx

http://virtualheadquarters.com.au/services/virtual-address  

http://www.gecentre.com.au/virtual-address-sydney.html 

http://www.mbe.com.au/web/page/virtual_office_services 

There are many more, I would love to see if anyone here has used these.

Hi Ananda, it really depends on your business, but I don't think you need a physical office to build "trust" online. Your trust is built with your "online office" i.e. your website, social media, blogs and marketing etc.

These days a lot of appointments can be done online i.e. I am based in Geelong but I saw a client in Sydney. In that instance, it doesn't matter if I have a physical office, co-working space, home office or a kitchen table, as long as the back wall looks good and I can prove that I know what I am talking about then I will get the business.

Cheers
Chris Carlin
Director - Master Your Money Now

From a legal perspective, you will need to have a registered business address.  This doesn't need to be a business location where customers visit, it can be a home address.  This address will be on a publically available register so people can contact you for legal reasons.

We now live in a gig economy where people freelance or run a profitable business from home, using alternative addresses such as PO Box for online businesses. Therefore, I don’t think there is a need for a physical address for businesses. People may be able to guess you are a small business based on your address, but I don’t think it reduces their trust in you. I’d happily buy from a small business and deal with them if they are offering what I need or want at the right price, and they seem like decent people running a genuine small business.

Interesting answers here!

I too have come across many businesses with virtual offices. Small to medium businesses, start-ups, freelancers, and some individuals who work from home. Some of the bigger corporations also prefer a virtual office space though, especially in a time like this where a pandemic has come and changed how we would "normally" do things.

There are pros and cons to having a virtual address, but I see the glass as half full.

A benefit includes cost friendliness: great for smaller businesses who want to test the waters of entrepreneurship. Also, do you really need office space if your workforce is only 1-2 people?  
You also have the flexibility to work from anywhere, at any time - great for travel bloggers and people in this line of work. Also, you have enhanced privacy and more security with an online office. 

It is worth researching if you are looking into this, as there is something available for everyone.

I'm totally for it, @Eloah Paes Ramalho 

Not really. It depends on your business type. In any case, the street address (Especially a good one) would finalize your company's professional image. Still, it's not obligatory. Just have a properly working e-mail address.

Think of this from your customer point of view.  How can your potential customers differentiate a fraudster website from a genuine website? Does fraudster website normally has a physical address on it?  What would your customer think if they can't find an address on your website?  

You certainly don't need a physical address for a website but if are selling something on your website and you want to attract more customers, you should have one.