Tonnes of bricks could again rain down on a Sydney street amid concern more parts of a charred seven-storey building might collapse.

More than 120 firefighters from 30 fire trucks battled the blaze which broke out at a heritage-listed former hat factory in Surry Hills on Thursday afternoon, consuming the building as thousands of people watched on.

Firefighters worked through the night to extinguish the blaze and are using a drone to monitor hot spots for potential reignition.

There are concerns more building walls could still collapse without warning.

"There are two walls that are in a precarious position," Fire and Rescue NSW Superintendent Adam Dewberry told AAP on Friday.

"There's definitely a high chance they'll come down without notice."

Supt Dewberry said there is still a significant amount of work to be done to make the building safe for access, especially if the wind picks up.

"We are talking about tonnes and tonnes of bricks that could come down and become projectiles," he said.

"There are glass windows and glass panelling still falling down from the building across the road."

A tight exclusion zone surrounds the building, ensuring nobody including firefighters can get in.

About 50 people are still unable to return to their homes after being evacuated.

Among those locked out overnight was a bride getting married on Friday.

Firefighters were able to enter her apartment and collect her wedding dress during a run for essentials.

Once the area is safe, residents and businesses are expected to be allowed to return to their premises and the major thoroughfare Elizabeth Street will be reopened.

Supt Dewberry praised his crews for preventing significant damage to nearby buildings after fire spread into an apartment block and one suffered extreme heat damage to its exterior.

There were plans to turn the former hat factory into a 123-room, two-restaurant hotel at a cost of almost $40 million.

The cause of the blaze remains unknown, and an investigation is underway.

Due to the size of the fire and the impact on the community, a report will be prepared for the coroner.

A locksmith working nearby said he saw a group of teenagers running from the building as it caught alight.

"One of our workers did see some school kids coming out of the building," a Hildebrandt Locksmith employee, who did not give his name, told AAP.

The fire was one of the largest fires in the city for years, Fire and Rescue NSW acting Commissioner Jeremy Fewtrell said.

He said it was lucky no one was badly hurt in the extremely dangerous conditions.

The former factory's roof collapsed, then the floors, before parts of the building's walls fell down shortly before 5pm, sending red hot bricks tumbling to the streets below.

The only reported injury was a minor burn suffered by a firefighter.

A ute parked beside the building was also lost in the fire.

© AAP 2023