WeWork on Tuesday announced a deal to buy the oldest luxury department store in the US as shifting retail landscape yielded ground to the booming sharing economy.

Office-sharing startup WeWork said it is buying Lord & Taylor's flagship store on Fifth Avenue in Manhattan in a joint venture with Rhone Capital.

The deal also involves WeWork leasing space in HBC department stores, beginning with the upper floors of the Hudson's Bay locations on Queen Street in Toronto and Granville Street in Vancouver and Galeria Kaufhof in Frankfurt.

Hudson's Bay estimated that the overall deal would result in $1.6 billion in cash on its balance sheet and reduced debt.

"This is a transformative partnership that rethinks how retailers create exciting environments and leverage less productive space, while substantially improving the value proposition," HBC executive chairman Richard Baker said in a release.

Baker maintained that the alliance puts HBC "at the forefront of dynamic trends reshaping the way current and future generations live, work and shop: the sharing economy and urban and suburban mixed-use real estate planning."

The sale of the Lord & Taylor Fifth Avenue building by Canada-based Hudson’s Bay to newly created WeWork Property Advisors entity, by itself, was valued at $850 million US.

The flagship store was expected to continue its retail business through the year-end holiday season.

After that, it will be converted into WeWork’s New York headquarters along with WeWork office space and a redesigned Lord & Taylor store of approximately 150,000 square feet (14,000 square meters), according to the companies.

"Retail is changing and the role that real estate has to play in the way that we shop today must change with it," co-founder and chief executive Adam Neumann said in a release.

Since launching in New York seven years ago, WeWork says it has grown into a network with more than 150,000 members at some 160 locations around the world.

"WeWork could not be what it is today if it wasn't for our New York roots," Neumann said.

"The WeWork of today is a testament to the energy and hustle of this great city and it permeates everything we do."

WeWork in August announced that Japan's SoftBank Group made a $4.4 billion investment in the company.

WeWork -- which offers warehouse-style shared workspace to smaller companies, primarily tech startups -- expected to use the massive investment by SoftBank to expand its global presence.