I am a firm believer in layer 3 everywhere. No more layer 2 connectivity as much as possible.
It's how I deployed VM's at scale using BGP from the VM host to the top of rack switch. VM's could route to each other, but no layer 2 connectivity.
It allowed for easy migration of systems between VM hosts too, as the ToR would learn the /128 or /32 and traffic would route to the new VM host.