In April, Westminster City Council granted planning permission for the demolition of an office block next door to Grand Central Studios on Marlborough Street and its replacement with luxury flats.
The studio challenged the decision at London's High Court, claiming that the development would jeopardise its business.
Barrister James Maurici QC said noise and ground vibrations could have a devastating impact on the studios.
No amount of soundproofing would be enough to protect the silent recording environment, he told High Court judge Mrs Justice Patterson.
However, the studios will now have to accept the development after the judge dismissed their challenge.
She said an environmental management plan was in place, requiring developers, Marlborough House Ltd, to minimise vibrations.
The council, she ruled, had "struck the right balance" and its decision was not irrational.
The studio also argued the council had taken inadequate account of the creeping "residentialisation" of the West End.
The council's own deputy leader, Robert Davis, had expressed concerns about loss of office space in the area.
Announcing a change in approach by the council in March, he said the balance had "tipped too far" in favour of residential conversions and serious harm was being caused to the area's unique character.
However, the judge said the council's policy shift only came into effect on 1 September - after the planning permission was granted.
And the council was entitled to take the view that there was "no economic case" for retaining the office block, the judge ruled.
R on the Application of Grande Central Sound Studios Limited v Lord Mayor and Citizens of the City of Westminster. Case Number: CO/2933/2016