But they have indicated they are planning to fight on to get the development passed in the future.
"We are shocked and disappointed and have yet to see the detail. I think Northern Ireland has yet again dropped the ball," said a spokesperson for the developers.
"This was a terrific opportunity for Banbridge and Northern Ireland. The application for the Tesco Extra store would have secured a further 600 jobs for the local economy and underpinned the potential of Bridgewater Park, where up to 2,000 jobs could be created.
"It is disappointing that the planning system has failed to recognise the opportunity offered by this investment and the wishes of the majority of the community, who so badly wanted to see the project succeed and deliver such a boost to the local economy and tangible benefits for the town centre. I would like to thank all those who have voiced their support.
"We need now to consider the detail of the decision, but we still firmly believe that the proposals are right for Bridgewater, right for Banbridge and right for Northern Ireland.
"I hope that we will be able to continue to pursue this fantastic opportunity for the local community and economy – but this will depend to a large degree on the future willingness of our investment partners to remain committed to Northern Ireland."