This is a tricky situation to be in. You don’t want to lead her on, but you also don’t want to cause any tension or awkwardness in your mutual friend group. My advice to you is to let her down easy. Maybe call her (or text if that’s your primary form of communication), and let her know that you can only see a friendship with her. If that sounds too harsh, then you can give an excuse that you aren’t looking for a serious relationship right now, and think it’d be better you two continued to hang out as friends with your friend group for the time-being. A simple text like, “I’ve had a lot of fun getting to know you, but I’m not looking to have a girl friend right now. I hope we can continue getting to know each other and hang out as friends.” Done, done, and DONE.
The key part of this is to not be rude or disrespectful since you will be seeing her again through your friends, and you don’t want to give her any reason to dislike you or turn any of your friends against you. She may be a little hurt, especially her ego, when you tell her, but she will get over it over time. She will probably be appreciative that you were being honest and didn’t lead her on. Be sure to cut it off completely if you don’t want to date her any more though, which means no booty calls or drunken hook up sessions. It will only confuse her more and give her false hope. Make sure to always be a gentleman and say hello to her when you see her out and about and give her a hug. But besides that, you should be in the clear my friend!
Best of luck!
E-mail me at firstname.lastname@example.org for more questions!