A family’s dream for a $38 million hotel in Sydney’s Surry Hills has been gutted in the raging inferno that toppled a historic building.

Within an hour of the blaze at the old Henderson hat factory, the roof collapsed followed by the floors and parts of the building’s walls.

Two children, accompanied by their parents, handed themselves in but police believe other teens were involved and have appealed for them to come forward.

More than 100 firefighters were able to save nearby structures, as two residential buildings were evacuated and at least 70 residents displaced.

The 110-year-old heritage-listed warehouse was to have been transformed into a new multimillion-dollar hotel with 123 rooms and two restaurants.

The design, which was six years in the making, was to maintain the original factory’s street facade, according to design concepts.

In a terrible irony, the lead architect said the two buildings either side would have been knocked down for the gleaming modern complex.

“There are three buildings on the site and the heritage view was that the middle building was the one to retain,” architect Tim Greer told The Sydney Morning Herald.

“The irony is that the building that burns down is the one we wanted to keep.”

The new hotel by developer Hanave Pty Ltd was to retain the historic building’s facade. Photo: Tonkin Zulaikha Greer website

The architect’s website says ‘The New Hotel in Randle Street’ would transform the Henderson Hat manufacturing warehouse building into a “vibrant hotel that acts as a catalyst for connecting and reactivating the surrounding public domain”.

Emergency centre

As the smoke lifted on Friday, an Emergency Operations Centre (EOC) was activated to coordinate a number of agencies handling the fallout.

The centre’s priorities include rendering the fire ground safe for on-site investigations and coordinating the safe demolition of the remaining structures.

Displaced residents also need to be housed.

“Engineers and experts from NSW Public Works are continuing to monitor the stability of the remaining structure,” said a police media statement late Friday.

“They have instigated assessments and will determine the most appropriate method of demolition.”

Detectives from the State Crime Command’s Arson Unit are leading the investigations into the cause of the fire under Strike Force Strontium.

Two 13-year-old boys, who presented with their parents at Paddington and Kings Cross Police Stations overnight Thursday, are assisting police with their inquiries.

Police have been told there were other teens with the boys at the time, and investigators are appealing for them – and their parents or carers – to come forward as soon as possible.

Witnesses reported seeing a group of young people running from the heritage-listed former hat factory in Surry Hills on Thursday afternoon, shortly before the massive blaze took hold.

The remains of the building that went up in flames in Sydney. Photo: AAP

The brick-and-timber building, and a neighbouring structure formerly home to karaoke bar Ding Dong Dang, was known for regularly housing 15 rough sleepers.

Police made contact with 13 of those people to confirm their safety.

A tight exclusion zone is expected to remain for at least seven days, displacing at least 50 residents as engineers’ concerns grow about a bulging wall in the factory.