The series is shot in a disused IKEA store in Burbank, California. Multiple major studios passed on the opportunity to lease out their own studio space due to concerns over how inherently messy the game is.
The lava in "Floor is Lava" isn't actually lava of course, but according to Newsweek, the lava is a mixture of "water, cornstarch, and xanthan gum." ('Floor is Lava' on Netflix: What the Lava is Made Out Of, Newsweek, 6/23/20)
The floor is not actually lava, the crew use a combination of practical effects and computer generated images to produce something comparatively similar.