One of London’s biggest gay nightclubs is facing closure to make way for a £1.3bn apartment, hotel and office development, in a move the club says amounts to “social cleansing”.

XXL is believed to be the last “bear” club in London, and DJ Fat Tony, a close friend of Elton John, regularly performs to 2,000 people a night. This week, developers backed by investors from Malaysia and Singapore gave the club three months to wind up after its owners lost a court appeal. Forty jobs will go at the club, which has been operating for 19 years.

“It was the only LGBT bar or venue left in Southwark,” said James McNeil, who co-runs the club. “It is like we have been socially cleansed of LGBT venues. We are one of the few venues serving the 30-plus community. There are people who haven’t come out who will go there because it is a safe zone.”

He said the atmosphere was fun and welcoming and “when you hear our crowd singing a Lady Gaga song it sounds like you are at Twickenham [rugby stadium]”.

The development that will be built above the club’s railway arches and on neighbouring land will include towers rising to 34 storeys with 489 apartments, a hotel, offices and shops. It is a prime site with Thames frontage and is close to Tate Modern. The club’s arches will be occupied by independent shops and put to as-yet-undecided cultural uses, the developer, Native Land, has said.

Southwark has the second-highest density of gay, lesbian and bisexual people of any UK borough, after neighbouring Lambeth. But gay clubs have been closing rapidly in the capital, declining in number from 125 in 2006 to 53 in 2017, according to research by University College London.

The latest to close was Bloc South in Vauxhall this month, which opened in 2017. Thirty percent of clubs that closed became venues that were not specifically gay, and 21% of closures were because of property development.

Mark Ames, who co-founded XXL in 2000, said: “Yet again, London is about to lose something that is unique to its character: the idea of open arms. This is a reflection on our society. There is no room for difference; everything has to be sterilised and the same. This is being done by people who don’t care about London’s community. All they care about is turning a buck.”

Facebook Twitter Pinterest Artist’s impression of the proposed development. Photograph: Native Lands

DJ Fat Tony, whose real name is Tony Marnach, said: “London can’t afford to lose another big gay venue. The gay scene has been so crippled over the last few years. We [still] need gay clubs because the world we live in is not going forwards, it is going backwards. In some areas of London people still can’t walk down the street together.”

He said the club “wouldn’t go down without a fight”, adding: “I don’t see why we need more and more luxury flats along the river to lie empty.”

XXL has previously provoked controversy because it is men-only and has a dress code that bans female clothing, which led to protests that it was opposed to the transgender community and men who dress in a genderfluid way. The issue blew up after door staff refused entry to a group of customers wearing heels.

Ames and McNeil said they had proposed an LGBTQ cultural venue in the new development but the plan had not been adopted. They have questioned whether attitudes towards homosexuality in Malaysia and Singapore, where two of the main investors are based and where gay sex is illegal, may have affected decision-making.

In Singapore, same-sex couples are banned from adopting children, and in Malaysia a lesbian couple were caned in a sharia court last year after being convicted of having sex.

Native Land and its investment partners strongly deny any such motive. They said in a statement that the scheme was consistent with a planning consent granted in 2014 to a previous investor, the Carlyle Group, from which it bought the site in 2015.

“Native Land is implementing this element of the development in line with the original consent, to create new office, retail and cultural uses and a public thoroughfare,” a spokesman said. “The consented redevelopment will open up a previously inaccessible quarter of Bankside to the public, delivering a mix of offices, independent shops, three cultural venues, apartments and a minimum of £65m of affordable housing for Southwark.”

It said XXL’s operators had known about the development proposals since 2014 and did not object to the planning application when it was submitted.

McNeil said this was because a planning tribunal had already asserted their right to continue as a club and they wanted to work with the developer to try to create a LGBTQ facility. They proposed “the first national LGBTQ centre to celebrate, archive and support the lesbian, gay, bisexual, transgender and queer experience”. It was to feature an archive, bar, gallery and performing arts space, but the developers have not pursued the idea.

The club also alleges that the office of the London mayor, Sadiq Khan, has not supported its attempts to stay open over the last two years. But Amy Lamé, the mayor’s “night tsar”, said she would try to save XXL, which she described as “a crucial part of the city’s LGBT+ nightlife”.

She said: “We have been working with the venue for two years to challenge a planning decision made by the previous mayor and secure the club’s future. This has included exploring options for new premises, lobbying the council and offering support and advice to the team that run XXL. I am determined to support the owners of this important venue and call on the developer, Native Land, to meet with me to find a more productive solution.”