Many of us do not look at the physical location of a web host before purchasing hosting space. But according to some staff at Google, the physical location of a web host might have some bearning on the rankings of a site, especially if the site is targeting customers/clients from a particular region.
Quote :
In our understanding of web content, Google considers both the IP address and the top-level domain (e.g. .com, .co.uk). Because we attempt to serve geographically relevant content, we factor domains that have a regional significance. For example, “.co.uk ” domains are likely very relevant for user queries originating from the UK. In the absence of a significant top-level domain, we often use the web server’s IP address as an added hint in our understanding of content.
Source: Official Google Webmaster Central Blog
There is a also a forum discussion going on here: Do you look at the physical location of a web host
