Let's be honest, Animation Courtyard was a LONGGGG shot compared to Muppets. It's an absolute lay up decision.
1. They would presumably have to build a new office building in order to replace this one in some way. (As far as I know they also rent this particular building out to other people sometimes so I'm sure they like the money generated by having an office IN a theme park.
2. They would have to tear down everything, figure out what to do with Little Mermaid. Then remake/completlely fabricate new buildings/facades.
3. They would have to install new kitchens and food services/plumbing in many of these new buildings.
4. Makes another giant awkward dead end in a park with too many already.
5. tbh the area is genuinely way too big for monsters as it is. Having a massive town square the size of Animation Courtyard would look kinda weird. Plus it takes up an expansion plot that could have even more appeal.
The sad truth is, people weren't visting the Muppets enough, while it is super important culturally, it is not very popular. I adore the Muppets but with all of that, it's not hard to see why Muppets Courtyard was the thing to go. My hope is they do turn either M.I.L.F or Sunset Showcase into a new Muppetvision 3D but again this would end up FAR cheaper and imo be a much better end for the Muppets anyway than building Monsters in AC