We definitely want some space between cities. Any overlap is a complete waste of room in a 5CC. Yeah, we want to use all the bonuses and get luxuries that we can lose, but that is not vitally important. What is vitally important is that we claim as much space as we absolutely, and reasonably, can. We should also get Iron Working and the Wheel as soon as possible, to make sure we at are at least able to build something other than Bowmen. So we should hold off on building cities four and five until we can secure those resources, unless it is completely unreasonable.