The woodworking centre has been sited in Leith St, Dunedin, for at least 10 years, and for some years before was run from the Fraser building at the Dunedin Hospital site.
Board mental health and community services group manager Elaine Chisnall said the workshop would close on October 17 because it had been served notice by the landlord, Kaikorai Metropolitan Brass.
For some time before this, however, there had been concerns about the venue because it did not meet health and safety standards, including those for disability access, fume extraction and infection control, she said.
Despite the non-compliance, the workshop's safety record had been "pretty good", with a minimal number of incidents recorded.
The service, which is run by one instructor, cost about $80,000 a year, but when alternatives were considered, the cheapest option, refitting another building, would be in the order of $200,000, she said.
Wakari Hospital had been investigated as a possible relocation site, but there was no space available, and even if there had been it would have required funding for refitting, something the board did not have.
Kaikorai Metropolitan Brass president Len Rush said the lease had ended because his organisation wanted a longer-term tenancy than the board was interested in. The space would be let to another existing tenant, the University of Otago, which was likely to use it for storage.
The organisation had been happy with the workshop as tenant and supportive of the work done there and Mr Rush said he was sad to hear it was closing.
The daily woodworking workshop was used by 28 men a week and was first established to provide rehabilitation activities for people following accidents or illness. Its role was later expanded to include those with mental illness.
Mrs Chisnall said each of the men attending the workshop would be reassessed to see what alternative activities would be appropriate and available for them through other community services.
One of those concerned about the closure and who would like more done to find a new site is Gwen Bezett, whose partner Peter Brazier (51) has been attending the workshop following a recent stroke.
He had previously done painting and building work and the workshop had been important in helping him regain confidence about using power tools again.
"It's been really great", she said.
Ms Bezett said the social aspect of it had also been important and having to go somewhere else would disrupt that.
Crystal Curran, who attended the workshop some years ago and who has maintained contact, has also expressed concern.
In a letter to the editor of the Otago Daily Times she made a plea for anyone with suggestions or assistance for the workshop to take action to intervene.
At this stage, it is not known whether long-serving workshop instructor Colin Campbell will continue to be employed by the board after the closure. Mrs Chisnall said this matter was still being worked through with him.
