The 28-year-old agreed personal terms last week, but reports claim the former Liverpoo star is keen to remain in the South.
“Naturally this is hugely disappointing for us as Peter was one of our primary targets,” Bruce told the Black Cats’ official website.
“I know he was impressed with the set up here when he came for talks, but it’s simply a matter of geographical location and that’s not something we can affect.”
“What’s pleasing however is that it shows the intent of the club going forward that we are trying to bring in players of his calibre, and we will continue to pursue other targets,” he added.
“We have a number of irons in the fire at present and we will be looking to make several additions to our squad in the coming weeks.”
