A proposal to transform a car park in south London into 800 cheap artists’ studios has been rejected by Southwark Council.

The Peckham multi-storey has staged an eclectic programme of music, art and temporary events – including performances by Micachu & The Shapes and last year’s London Contemporary Music Festival – since being taken over by arts organisation Bold Tendencies nine years ago.

The Bold Home project, a collaboration between Bold Tendencies and cultural venue Second Home, had hoped to provide affordable studios for artists to tackle the dwindling amount of space available in the city. The council has instead opted for Pop Community Ltd’s application, which will offer 50 artists’ studios alongside “multi-use event spaces, pop-up retail and cafe/bar”.

Pop Community is a partnership between Carl Turner Architects and property developers The Collective, who previously worked together on POP Brixton, a “community campus” built from recycled shipping containers which caused some controversy on its launch this year.

Southwark Council had asked for proposals for the car park that would increase local employment, provide space for cultural and creative uses, and work alongside Bold Tendencies Arts and Frank’s Bar on the top floors.

Rohan Silva of Bold Home Silva criticised the decision by the council to opt for 50 studios instead of 800.

“The creative industries are one of the main drivers of growth and new jobs in London – if artist studios continue to be decimated in this way, all this will be at risk,” Silva told the Guardian. “Artists and creative startups have no trade union representation, and no voice whatsoever. That’s why they’re being squeezed out of the city, and we simply have to do something about it.”

A spokesperson for Southwark council defended its decision, saying: “The whole point of this interim project was so we could create a lot more mixed and open spaces in Peckham car park that can be used by the community, and the plans submitted by Bold Home would have made it more into the style of an office block. The car park is a public space and we didn’t just want it to become just a closed artist commune.”

The council said it was also attracted to POP Community’s proposal because it is being designed by the same architects recently chosen to redevelop Peckham High Street.

Read our report on London Contemporary Music Festival last year, which featured performances by Rashad Becker, Vessel and Florian Hecker.