WTF does physical location have to do with how "productive" your developers are? If you've got the right people, you don't have to worry about it - give them the job, set the schedule, and get out of their way. Doesn't matter if they all work in the same building, or if none of them are even in the same country. Yeah, I'm biased - I've worked from my basement on a team scattered across about 4 time zones for the past 5 years, and it's been great. I highly recommend THAT "seating arrangement" ;) If "productivity" has ever been a problem, nobody's ever mentioned it to us...