How important is geography to law firms? 

Perhaps the most important components of a law firm are the people, from the Senior Equity Partners down to the paralegals and administration staff. 

While the London remains unmatched in terms of number of lawyers and law firms, attention has been increasingly given to practices in the regions. The policy of North Shoring has been ongoing for a number of years, (most recently with Reed Smith announcing the creation a Leeds branch) and is something that is anticipated to continue. For many law firms, the mix of lower overheads, mature and developed talent pools, as well as strong transport links to the capital are persuasive factors in regional expansion. 

However, companies, including law firms, are fast changes a result of technological advancement. The established 9-5 working routine appears to be becoming increasingly redundant; and "virtual offices", shared working spaces and part time working are increasing. 

Will all these changes eventually lead to a scenario where location is totally irrelevant, and firms are broken down into the core components of just the employee and the electronic tools needed to carry out the work?

Personally I consider it unlikely, at least in the foreseeable future. It’s a style of working that holds particular relevance for certain sectors (e.g. the creative industries),  and many law firms are willing to be flexible for individuals or circumstances. However, using technology in that matter would ultimately deprive lawyers of personal, face to face interaction  (both with clients and colleagues). In a sector where business development is now as important as technical agility, people skills are a must for lawyers who wish to progress.