Loftus-Cheek impressed on loan at Crystal Palace during the 2017-18 campaign before helping England reach the semi-finals of the 2018 World Cup in Russia.
The 22-year-old was strongly linked with a summer move away from Chelsea, but remained at Stamford Bridge, and has only played 33 minutes of Premier League football this season.
Allardyce has said that he is "disappointed" for Loftus-Cheek, and has urged the midfielder to seek a move away from Chelsea at the start of 2019.
"I'm disappointed for Loftus-Cheek. Chelsea have told him he's going to be a part of the team this season and, if that is the case, they haven't lived up to that yet," he told talkSPORT.
"What he did for Crystal Palace last season and for England at the World Cup, I thought this would be a big season for him at Chelsea, but it's simply not happening.
"If I were Loftus-Cheek I would be battering the door down in January and saying, 'that's it, I need to get away'. And not on loan, get away from Chelsea properly and build his own career.
"He's had the taste of playing first-team football at Palace and obviously he loves Chelsea, but it's not happening for him there. He's got to play. He's too talented not to play, we've all seen that."
Loftus-Cheek came through the youth system at Chelsea and has 35 first-team appearances to his name for the London club.