Learn Polish: Mieszkamy w cichym sąsiedztwie. - We live in a quiet neighborhood.

The suffix -stwo is used to create abstract or collective nouns. When adding it to the root sąsiad, two phonetic changes occur: the vowel a shifts to e, and the final consonant d softens to dz, resulting in sąsiedztwo.

Does 'sąsiedztwo' only refer to a physical place like a neighborhood?

Not necessarily. Because the -stwo suffix often forms collective nouns, sąsiedztwo can refer to the physical area (as it does in this sentence), but it can also refer collectively to all your neighbors as a group.

Why does the noun end in '-stwie' instead of '-stwo' here?

The preposition w (in) requires the Locative case when describing a location. For neuter nouns ending in the suffix -stwo, the Locative ending always causes the cluster to change to -stwie.

Why does the adjective 'cichy' take the form 'cichym' in this sentence?

It has to match sąsiedztwie in gender (neuter), number (singular), and case (Locative). In the Locative case, both masculine and neuter adjectives take the -ym or -im ending.