From the Super Mario Wiki, the Mario encyclopedia
Santa's workshop is a large property owned by Santa Claus at the North Pole. At the workshop, Santa's Elves manufacture toys for Santa to deliver on Christmas Eve. The workshop consists primarily of a factory where the toys are built. There are also homes for the Elves, as well as their own playground. There are presumably stables for the reindeer, although they were never seen. Lastly, there is a large castle in which Santa Claus resides.
During the events of "Koopa Klaus", Koopa Klaus intends to ruin Christmas, and does so by freezing Santa's workshop, along with all the Elves and reindeer, under a thick layer of ice using Ice Bombs on Christmas Eve. Koopa Klaus then takes off in his sleigh with Santa as his captive, but before he can make his escape, Mario and Luigi, who had followed them there, use a see-saw in the Elves' playground to catapult an ice block at the sleigh, causing Koopa Klaus and Santa to fall out. Koopa Klaus then makes off with Santa Claus on foot.
After pursuing Koopa Klaus and Santa across the North Pole, Mario and his friends eventually stop Koopa Klaus and saved Santa, with whom they return to the workshop. However, Santa laments that they were too late to thaw out the workshop in time for Christmas, which prompted Toad to give Santa his snowboard; an early Christmas gift he had received from Princess Toadstool, if only so that Santa could at least have one present to deliver. This act of kindness brings out the Christmas spirit in both Toad and Santa, which is warm enough to melt away the ice around Santa's workshop.
With his workshop free, Santa is able to resume his duties in time for takeoff, and even allows Mario and his friends to ride alongside him in his sleigh as he makes his deliveries across the world.