It's not to say that distributed teams can't be high funtioning it just takes 3x the effort from a management perspective. Good management is in even higher demand than SWE skills. A good manager will gravitate towards teams that are colocated because they know they can be more effective for less effort.
To level the playing field it has to be all colocated or all remote. Talent currently holds the cards because of demand but talent+colocation will always win in a contest.