Seaham-based ATD Fitness had submitted a proposal to convert the Kingdom Hall, on Strangford Road, into a new base for the business.
Durham County Council approved the plans, which included no alterations to the exterior of the building or wider site.
However, Andrea Tweedy-Dixon, gym owner, has said the scheme will no longer progress.
She said: “Whilst we were in discussions and hopeful it may have worked out, the building has since been sold elsewhere before the change of usage was approved.”
It means ATD Fitness is still searching for a new site to replace its current premises at the Seaham Grange Industrial Estate.
The award-winning gym offers personal training, group fitness, yoga, and pilates classes.
But Ms Tweedy-Dixon is concerned about the future if a new site cannot be found.
She added: “Time is now becoming a real concern for us.
“If we are unable to secure a new premises before Christmas, there is a real risk ATD may be forced to close.”
Memberships at the gym have grown to around 300 in the six years since the COVID pandemic, when demand for classes grew.
“ATD isn’t just a gym it’s a huge community hub for so many people locally,” Ms Tweedy-Dixon added.
“We currently support hundreds of members of all ages and backgrounds, many of whom rely on the gym not just physically, but mentally and socially too.
“We are a safe space for women. We run classes seven days a week, transformation programmes, support groups, community events, and we’ve built this business completely from the ground up as a local family-run business.”