Small businesses said they are facing closure after receiving eviction letters giving them four weeks to move out of their offices before they are converted into flats.
Forty businesses and up to 150 employees in the Willow Lane Industrial Estate in Mitcham are searching for new premises after being told they must leave the block by Sunday, September 7.
The announcement comes in the same month as another business community has been forced out of Merton, after Wimbledon Studios was sold to Marjan Television Network, evicting 40 businesses from the Media Village.
Business owners are thinking of quitting or retiring after the devastating news from the centre's owners earlier this month.
Merton Council initially objected the proposal to convert Connect House into 46 flats, but under the government's recent permitted developments legislation, local authorities are powerless to object to applications to convert offices into housing if it complies with transport, contamination and flood risk issues.
Health, beauty and cleaning agency co-owner Alison McKenzie, of Spanking Clean Limited, said she and her brother Daniel Bryden face losing thousands of pounds from the eviction.
The entrepreneur, who moved into the office with a 12-month lease in April, said: "It's devastating for us, especially because we are starting from scratch.
"My brother worked his socks off in his last job and put all his money into this business. Now he has had to get an evening job as a restaurant delivery man to help cover costs."
Geoffrey Archer, managing director of G and D Fire Protection, said he is thinking of quitting his business altogether after 20 years at the estate.
He said: "I’m thinking of retiring because of the trauma of it all.
"We have to throw a whole lot of stuff away because we can’t get rid of it in time."
Merton Chamber of Commerce (MCC) and Willow Business Improvement District (BID) have written to Eric Pickles, secretary of state for the department of communities and local government, asking him to appeal the decision on the grounds the site is unsuitable for residential use and new flats do not justify loss of businesses and livelihoods.
Diana Sterck, MCC chief executive, said: "We are well aware of the government’s urgent need to provide more housing in London but the conversion of this building makes no sense.
"The estate is very busy and noisy, the access road quite risky for pedestrians, there are heavy industrial businesses in the immediate vicinity, and the environment is unsuitable for residential use."
A Department for Communities and Local Government spokesman said: “The Government’s permitted development changes are providing much needed homes in the capital where there is an acute need and elsewhere.
“This is making good use of existing building stock, using brownfield sites, protecting the countryside and is at no cost to the taxpayer. ”
Connect House in the Willow Lane Industrial Estate
The council held an emergency meeting with MCC, Willow BID and 12 Connect House businesses on Thursday, August 14, to offer support and advice on finding alternative office space in Merton, but many of the businesses are already looking to move out of the borough.
Tony Whittingham, who moved disabled passenger taxi service Easy Activ Mobility to the site nine months ago, said he is likely to move to Sydenham.
Councillor Andrew Judge, cabinet member for environment and regeneration, said: "We are not happy with or supportive of this because we see that it is both damaging to the local economy and will probably store up problems for the future residents in this development complaining about existing businesses."