Google uses numerous signals to determine geographical relevance. Some some of the signals are more obvious than others. Three of the most fundamental signals are as follows.
1) IP Location
There is an abundance of evidence available that supports the notion that Google does indeed look at the geographical location of web servers based on IP assignment in relation to SEO.
For example if your IP address is based in the UK Google, based on probability, Google is more likely to interpret that as a signal that your service is relevant for the UK audience. This doesn’t just apply to the UK, it applies to other countries as well.
2) Top Level Domains
IP or server location isn’t the only basic signal they look at. Google also looks at TLDs (top level domains). In other words, .i.e. uk .fr .it and other regional TLDs can influence rankings positively in the territories to which they are assigned.
There are some exceptions where the TLDs have dual purpose, for example .co domains These serve as both Colombian domains, and as generic commercial domains.
3) Google Webmaster Tools Location Settings
You can also specify your target location in Google Webmaster Tools. You can even specify that each subdomain is tailored for a specific country. This is extremely handy for geotargeting.
It is worth noting that the settings within the Google Webmaster Tools Control Panel does appear to have overriding power when it can be used. It cannot be used to change a region specific TLD to a generic one, or assign it to another region though.
Food for though; should you find a good deal with the US hosting company for example, tTen don’t worry too much about server location. So long at the performance is adequate, you can always set your preferred location using Google Webmaster Tools.