The Andrews Labor Government has said it will launch a review of Melbourne’s Federation Square after Heritage Victoria blocked the construction of an Apple flagship on the site, citing adverse effects on the square’s cultural heritage.

The plan, which would have seen the three-storey Yarra building demolished to make room for the tech flagship, was denied on Friday when the Heritage Victoria deemed the construction would cause “an unacceptable and irreversible detrimental impact on the cultural heritage significance of Federation Square.”

Apple said it was disappointed by the decision, but would remain committed to customers in Melbourne and Australia.

The tech retailer currently runs five stores across Melbourne, in Chadstone Shopping Centre, Highpoint Shopping Centre, Westfield Southland, Westfield Doncaster, and Westfield Fountain Gate.

Victorian minister for tourism, sport and major events Martin Pakula said the of Federation Square will examine how it looks, how it is funded and how it operates in an effort to ensure it continues to stand out as an attraction to Melbourne.

“Since its opening in 2002, Federation Square has hosted creative events and world leading attractions,” Pakula said.

“The review will ensure this much-loved space can thrive as a civic, cultural and commercial hub for years to come.”

After the 2017 plan for an Apple flagship was put through without public consultation, Victorians will be given the opportunity to have their say in the review, which is set to be completed by the end of 2019.

Victorian shadow minister for planning and heritage Tim Smith said the decision was a “humiliation” for the state government on Twitter.

“After years of secret negotiations, with one of the world’s iconic brands, Apple, Daniel Andrews has been forced into a cringe worthy climb-down because his ministers didn’t do their due diligence,” Smith said.

Smith also called on Heritage Victoria for having fast-tracked such a nomination when it is “often missing in action when it comes to protecting heritage homes.”

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