Firefighters were called to the fire in the basement of Cafe Vega, in Main South Rd, at 5.30am.
The fire started in the basement underneath a storage area, causing significant structural damage to the building as it travelled along the underside of the floors and up through wall cavities into the ceiling space, bursting through the roof before it could be extinguished, Detective Sergeant Neil Lowden said.
A fire safety officer from Invercargill and detectives went through the building yesterday morning, but found no obvious cause of the fire.
However, as there was no electrical wiring in the basement, the fire had to have been set deliberately, Det Sgt Lowden said.
He asked anyone who had seen anyone hanging around the building yesterday before 5.30am to contact police.
Historically, there had been some issues with young people hanging around the back of the building, but there had been no problems for some time, he said.
Kathy Grant, who, with her husband, Phil, owns and runs Cafe Vega and a catering business from the same site, was still shocked yesterday.
She had been alerted to the fire by phone, and arrived to see the fire burst through the building's roof, she said.
"I was, like, 'Oh, my god, the roof.' You just feel helpless looking at it; there's nothing you can do."
The cafe and the kitchen were mainly smoke-damaged, but the area where the fridges and other work spaces were, and a storage room, would probably have to be replaced, she said.
The company had many jobs over the Christmas period and she was not sure what would happen now.
But her insurance company had said it would get on to repairs quickly, she said.
