So I'm trying to worldbuild and create a custom campaign for an lgs that does modified AL rules. Essentially, all books are legal. How do I worldbuild when I don't know what is going to be used?

Start with the vanilla races (humans, dwarves, elves, etc.), and work your way from there. They don't all need to be super fleshed out, just get some basic details hammered down for as many races as possible. If you can't think of anything for one, you can always just say they're merchants or explorers from a far-off kingdom.

Is this going to be an open campaign, where anyone can play at any time? If so, I think the main solution is "don't worry about it". Build what you need to build, and everything else is from "far away lands". (I'd be tempted to have humans be a weird people from far away, but I'm like that.) Center it around a major port city to explain where everyone came from.

If it's more closed, and you know the characters you're building for, then you can have the races that are being played be the dominant ones in the setting.

You do not have to use all of the available races. You do not have to allow players access to all of the available races. Even if it is AL "legal," it is your adventure and your world. Create it however you like.

My solution is quite simple: just make a list of the races found in your setting.  Boom; job's done.  You don't have to include them all.  But if you want to "future proof" your setting: just leave some blank space on your map, you can always say "such and such species comes form... over there." in future if a player insists upon playing a given race.  Or it can even be an element in the story: one of my DMs is presently running a campaign where-in our party consists of PCs "isekaied" from their native worlds.

Quote from CaptainCorvid >>

My solution is quite simple: just make a list of the races found in your setting.  Boom; job's done.  You don't have to include them all.  But if you want to "future proof" your setting: just leave some blank space on your map, you can always say "such and such species comes form... over there." in future if a player insists upon playing a given race.  Or it can even be an element in the story: one of my DMs is presently running a campaign where-in our party consists of PCs "isekaied" from their native worlds.

 Yeah, start simple. Detail what's close and leave the rest for farwaway lands, rumour and speculation. Add as becomes necessary.

If a player insists on being some obscure race, then he/she must have travelled far to get to where he/his is now, and probably can't easily get his/her cousins and kin into a war band to assist the party (trade off). Alternatively, some cataclysmic event tore him/her from his/her loved ones and he/she is trying to get back. 

If you keep it simple, but coherent, then your job as DM/worldbuilder becomes much easier

D&D has a tradition of portraying all the different races as typically living segregated from each other on their own lands, probably in part because that's often how Medieval Europe is commonly portrayed.

But that honestly wasn't true for Europe and it definitely doesn't have to be true for you D&D game.  You can very much have groups of different races living together and just say "oh yes, this city's also got Race X in it, as well" if you need to.

When designing a homebrew world, I ask my players what races they want to play and work with them to make a city/country/region which utilizes the races of those who respond.  But players are players, and the chances that a player or players will "forget" to tell you their race, change their race at the last second, join the campaign late, etc. are all very high.  In those cases, I work with the players to come up with something that works for the world--maybe they are a rare race from an isolated hamlet; maybe they are a nomadic people without an established presence in society; maybe they are from a foreign land; etc.

Plenty of ways to shoehorn in rarer races that you did not anticipate after-the-fact, so I would not be too concerned about it.  Working with your players and explaining "here is the world, your race would be rare here, let's figure out how to fit that in with your backstory" is a good way to solve the issue you raised of late racial introductions and get your players involved in a bit of worldbuilding and interested in the world generally. 

Sure there are simple methods, but for me to put together a home brew world, or maybe just a region. I like to draw up the core races and what brought them to live in the area. I determine their social orders, their religions, and their motivations to basically get out of bed in the morning. I brake it down by race, and determine commonality when I try to make them live on top of each other in a big city. But as nature tends to do in reality, communities spring up by commonality. Determining the ruler and hierarchal structure comes next so what ever groups favor the ruling party usually have a leg up. Also the ruling class will pretty much determine alignment of the city, dominant religion, and lore tie-ins. Unless it is an occupied city. 

Depending on the size of the city, I will spread out areas and determine roughly 12 buildings I want to flesh out for a campaign and the rest are general living, storage, and makeshift shops. I like to at least flesh out 2 churches as that is a minimum for most societies that grow past 200 population. The first few times takes multiple hours, but I could put something together now in about 2-3 hours. If I find myself fancy I will map out miniature set pieces and inventory them in a way I can build a set in like 5 mins. I need continuity in my story telling, and I value motivation. Port cities and cities built in resource heavy locations near a water source tend to be bread and butter in campaigns and more easily explained as pretty much all civilization that we have witnessed springs up this way.