Fire crews were called to the former Glamis Hospital in Montpellier St, Mornington, about 4am. Up to 35 firefighters at a time battled the blaze, which took several hours to extinguish. Police and fire investigators carried out a scene examination yesterday.
Grant Meikle, whose Queens Dr property backs on to the building, said his family were woken by neighbours knocking on their door telling them to get out.
"We were lucky the wind was heading away from us, so all the smoke and ash went over the other side of the road into some bushes."
It was not a surprise the building had caught fire, as it had been a hot spot for break-ins and vandalism, he said.
"There’s been a lot of break-ins, smashed windows, doors broken, and we’ve had to shoo a lot of kids away."
About six weeks ago, the sprinkler system was damaged during a break-in and the fire service was called then, he said.
The property is owned by Leng Seak Loke, who the Otago Daily Times understands is based overseas and was unable to be contacted yesterday.
Andrew Carmody, who also lives nearby, said neighbours had contacted the police numerous times about people breaking into the building.
"I don’t think you would find anyone who lives close to it who hasn’t gone to the police or had issues with people breaking in and making a mess."
When Mr Carmody and his wife moved to the area, the owner’s daughter was living at the property. The problems started when she left about two years ago, he said.
"Word got around it was empty and a door gets broken and people get in and it escalates from there."
Fire and Emergency shift manager Andrew Norris said by Dunedin standards, it was a very large fire.
"At any one time there were between 30 and 35 crew on site, which makes it a very significant fire for the city."
Extra staff were called in to cover the rest of the city during the fire, Mr Norris said.
The building had been significantly damaged. All residents and staff at the Glamis site were transferred to the Yvette Williams retirement village in Highgate when it opened in early 2011.
