Does Virtual Work Decentralize Cities?

Digitalization challenges spatial assumptions in urban economic theory and conventional urban planning thinking. Information and communications technologies could bridge access to qualities and resources typically associated with certain neighborhoods, transforming the roles of city centers and suburban business parks. This study examined the role of virtual/remote coordination in the neighborhood preferences of software small and medium software enterprises (SMEs). These companies rely heavily on knowledge and digital tools in flexible remote work arrangements. Analyzing a 2025 survey dataset of 94 software SMEs registered in Tallinn, Estonia, this work explored how neighborhood qualities, virtual coordination practices, and substitutability potential in company activities relate to neighborhood location preferences using ordinal logistic regression models. Despite evidence toward the substitutive capability of information and communications technologies, for the majority of software SMEs, virtual work and advanced organizational digital capabilities do not remove the appeal of central neighborhoods, and physical access to at least some localized characteristics remains important.