How to Turn Down … A Close Friend
I think it’s a bad idea to do this in person because if you say too much (or too little), you might give her false hope or make things irreparably awkward. Personally, I’d write an email that started by letting her know how bad it feels to let her down, and then I’d get into a reason or two as to why I didn’t think it’d work out. If you do this, just don’t pit all of the blame on her — even if you think she’s the problem.
Maybe you can mention things you’ve discussed with her in the past, like your commitment phobias, or you can always lean on the trusty “I don’t trust myself not to ruin our friendship” routine. Reading that might sound cliche, but if she’s a close friend, it’s probably the truth — cliche or not. End the email by letting her know you’ll give her space if she needs it, and that you hope to hear from her soon. Then you give her space and hope she bounces back. If she doesn’t get over it, don’t beat yourself up. You did all you could do, so it’s on her.