The oldest licensed music venue in Sydney, The Basement, will close its doors in less than a week. But the building owner has denied claims the space will be converted into offices.

After 45 years the music will cease, in what many industry figures see as a huge blow to Sydney's already struggling nightlife.

AMP Capital, which owns the building, said it was "equally disappointed" The Basement would not continue after a decade of working together.

Musician Daniel Goodacre founded the Monday Jam at The Basement in Sydney. ( ABC News: Mark Reddie )

"We have worked with the management of The Basement for more than six months to ensure an appropriate transition could take place and have amicably agreed to end the lease," a spokesperson for AMP said.

Shutting down reports the underground venue will be turned into office space, the spokesperson said: "It's too soon to say whether another music operator, bar or restaurant will move in."

The underground music spot is known for its prime Circular Quay location. It managed to survive former premier Mike Baird's lock-out laws at a time when many other live music venues closed.

The Macquarie Place venue has hosted the likes of Dizzy Gillespie and Herbie Hancock, and had scheduled gigs for Dami Im and Diesel in the next few months.

Big names played at venue

Daniel Goodacre, AKA Daniel G Felix, is the founder of The Monday Jam at The Basement.

"I am angry and very sad that The Basement is closing. It really is the place to go for live music in Sydney and it has always been such a great platform for new and emerging artists," he said.

When Prince toured Australia in 2012, he dropped in for a surprise gig, and he was not the only musician worth name dropping who has played at The Basement.

"So many big names have played a gig and then ended up at The Basement for drink and an impromptu performance — James Morrison, New York saxophone player David Murray, Cuban piano player Omar Sosa, to name a few," Goodacre said.

"It's amazing that a venue with such a name is closing down, especially when it's still busy all the time … we don't want to have a reputation where Sydney is boring, there's nothing to do, there's no nightlife."

News broken on Facebook

Musician Danny G Felix broke the news on Facebook, saying tonight would be the final Monday jam at The Basement.

The Basement will come alive with music for just one more week. ( Supplied )

Other musicians and fans expressed their disappointment on social media, saying Sydney had lost another venue.

Leichardt Mayor Darcy Byrne said "this is part of Mike Baird's legacy [the casino is still going great guns] we are one step closer to a sanitised Sydney".

Others were worried the venue's closure will bring about the end of Sydney's jazz scene.

Connie Mitchell, singer with Australian dance music group Sneaky Sound System, said the erasure of 45 years of music was a "travesty".

"I feel like we are living in Footloose but it's getting worse … enough already Reverend Shaw," she said.

Australian DJ and producer Katalyst said the amount of cultural heritage at Macquarie venue was "crazy".

"With all the vacant office space in the city they need to shut down this venue[?]"

Venues strangled by regulation: musicians

Coinciding with the news, a NSW parliamentary committee has today been holding an inquiry into the music and arts industry in the state.

High-profile musicians told the hearing that opportunities for young artists to build their careers off the back of live music were drying up, as venues were strangled by over-regulation.

Tim Levinson, better known by the stage name Urthboy, performs on stage. ( Facebook: Urthboy )

Dave Faulkner from the Hoodoo Gurus said the closure of The Basement was a tragedy, but it was also symptom of a bigger problem.

"That represents in a microcosm what is happening around the state and around the city. The city is dying as a cultural place," Mr Faulkner said.

"Sydney has been doing everything it can to destroy all those places of entertainment and to turn them into apartment buildings."

Brooke McClymont, from the country music group The McClymonts, said the situation was also dire in regional NSW and she feared the impact on younger artists trying to build a career from live gigs.

"The touring circuit in NSW is really struggling," she said.

McClymont said her band built its career touring venues around the state, but country and urban live venues had dried up and she feared for the artists of the future.

"There's no way new artists can come through and do that anymore because there's just not enough places to play," she said.

Tim Levinson, better known as musician Urthboy, said music venue owners were being squeezed from all sides by heavy handling from liquor licensing police and noise complaints from neighbours.

"The Basements gone, the Hopetoun's gone, The Gaelic Club doesn't do music, The Annandale doesn't do music," he said.