Ambient temperature can rise above sea level and air cooled system will shut off which is not good. It operates ideally well within 68F environment. Waater cooled is least affected with rise/fall in ambient temperature.
Air cooled is 10% noisier than water cooled.
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There are several advantages and draw backs to both system mentioned. Lets look at air cooled 1st. Air cooled is as suggested affected by the ambient air existing out side of the unit. In warmer climates they tend to have over heating issues and higher RH increases in compressed air system. Causing dryers to work harder or not at all. Noise as stated before also increases due to cooling fan noises.
Water cooled units don't care what the outside air temp does. Unless there is a draft style water cooler unit supplying cool water to unit, then it could affect the temp of cooling water. Other issues are cleanliness of water supply IE, minerals, algae, etc; Closed loop water systems require chemicals and testing on a regular basis to keep algae and other things from becoming a problem. Heat exchanger cleaning etc,etc.
So the bottom line to me is where compressor is being mounted and operated at. If outside air temp is higher then 85 deg F. then I might want to opt for water cooled. Other wise Air is easiest to install and maintain.