There is no avoid hurting someone by telling them you don't feel the same way about them. You have no control over such things. However you do have control over being an honest person or not. I would probably acknowledge to them that:
" I know it took courage for you to tell me this but I have to be honest with you, I don't have that same type of feeling for you.. You deserve to be with someone that wants what you want and feels the same way about you as you do about them."
Afterwards I would probably make myself less available to socialize with them. The reason for this is I would not want to give them "false hope" or hurt them more by talking about others I am dating and so forth. Offering "friendship" to someone you know is "in love" with you is a mistake.
(Maybe after they have found someone else or fallen love) with another person then it might be possible to be casual friends. Even then I would make sure I talk about my significant other from time to time and avoid too much one on one time with them.