Lake Macquarie coach Tom Croft said "it wasn't an easy decision" but it was ultimately the "right" one for the Dockers to drop out of the Black Diamond Cup in 2019.
The Dockers went without a win last year after being promoted to the top grade and will now take part in the Black Diamond Plate, or AFL Hunter Central Coast second-division competition.
Lake Macquarie were originally listed to stay up and play in the season-opening round at the new Central Coast Regional and Recreational Complex on March 30, but have recently opted to change paths in order to help the club rebuild.
"We've gone down to second division," Croft told the Newcastle Herald.
"It wasn't an easy decision, but it was the right decision for the club.
"All clubs would love to have a team in first grade and we did, but we didn't win a game last year and one week we got beaten by 200.
"That's not enjoyable and that doesn't help attract players.
"Hopefully this move will help the club to rebuild a bit."
They eventually conceded 2332 points from 16 outings.
Despite having already lost young prospect Damon Tually for 2019, Croft said the call to drop back has had an otherwise unexpected impact on the playing group.
"What it has done, since we made the decision, is seen a couple of the older guys comeback and play again," Croft said.
"There's a good feeling at the moment and we've been getting some good numbers to training. We're looking forward to the season."
The Dockers are now scheduled to open their new campaign by hosting Newcastle City at Tulkaba Park on March 30.
"It's still going to be a tough competition," Croft said.
"City, Cardiff, Terrigal - they are all tough teams.
"We're not just going back and expecting to win."
Lake Macquarie's late exit means the main Black Diamond Cup will now revert to a 10-team competition. The draw is currently being redrafted and set for release this week ahead of the AFL Hunter Central Coast season launch at Belmont 16s next Sunday (March 24).
The Dockers will continue to field a women's team.
Meanwhile, the Cardiff Hawks have picked up former East Coast Eagles forward Scott Pierce, 27, who was AFL Sydney Premier Division best and fairest in 2014.
The Warners Bay Bulldogs have recruited former UNSW Bulldogs defender Sam Rumball, 30, from Sydney and Muswellbrook midfielder Jeremy Smith, 18. Both have relocated to Newcastle.