The most likely answer is that the hammer is in the gray building in the icy biome in the Roblox game Find the Flags / Find the Things style walkthroughs I found. One walkthrough explicitly says: “the hammer is in the gray building in the icy biome.”

Where to look

  • Go to the icy biome.
  • Find the gray building there.
  • Check inside for the hammer.

Quick note

I found this from a walkthrough video, so the exact spot can vary if your version of the game has changed.

TL;DR: Hammer = gray building in the icy biome.