Change is nice too. We've got an open office and we change desks 2 to 4 times a year. So far we're grouped only with other engineers, but even with a small team you get much more comfortable with the people you work in close proximity to.

Rotation is fine. It just goes on my nerves when management rotates people randomly to "improve collaboration". I am not aware that the VPs switch offices a few times a year.

I think if the team is small and synergy is good, then this could work well. Sometimes a bad apple in the bunch (aka The Talker) can really be a drag on productivity.