Shen's lore implies that demons have some connection to the spirit realm, so potentially their origins lie there, though given the whole detail about them sustaining themselves off of humans there's a question to be raised as to whether human, or rather mortal influence brings these beings to life, since we know that Tahm Kench is a demon who existed in a different form before mankind was a big deal. I dunno if Nocturne's appearance in For Demacia confirms he's a demon straight up or is more of Demacians interpreting him as such, but with a Demon focused on things like greed and hunger, and one seemingly focused on nightmares, demons seem to embody something not so tangible; feelings, emotions, something that people experience that doesn't have a completely physical origin.
They're physical in nature to some degree, but current stuff pertaining to demons implies that there is a degree of less tangible stuff about them; a pressence that is more than the sum of that form. I look at Tahm and now Nocturne (providing he is a demon and the Demacians aren't just dumb dumbs) with some of their abilities as showcased in the lore and feel like they can go completely non-physical, since Tahm can just go wherever he wants in the rivers especially considering his iconic catchphrase "All the world's a river, and I'm it's king", implies that he's not so physically grounded or limited, and then Nocturne just straight up possesses Luca, but then you see others things to the contrary, particularly that in game Tahm doesn't dissappear when he dies like you'd expect a non-physical entity to do so; he just drops down dead. Nocturne's animation is old and gameplay doesn't reflect lore, but animations are always done with care, especially death animations, so this was a deliberate choice.
Current thinking on demons and lore that is available lends me to believe that demons have non-physical origins and can be intangible in the right circumstances, but are manifestations of something related to living beings and have a very much physical pressence. The particulars perhaps differ depending on the demon, as does their approach.
Mind you I doubt there's good demons. If there were calling them "demons" would be a bit odd. Perhaps some demons don't end up being such horrible, sinful embodiments as others, but I doubt there are many that could be considered "good" by mortal standards. Maybe some more neutral ones but again, depends on the particulars. We don't have many demons to look at right now to figure those particulars.