It's good to be honest.
Tell her that you are very, very fond of her as a friend and want to keep your relationship in that capacity.
You are very fond of her: and telling her that you're "very, very" or "extremely" fond will comfort her that you at least find her genuinely worthwhile as a person.
She'll probably be at least a little embarrassed at first, but this is the nicest way to let her down gently and make her feel less awkward about seeing you at the gym.