Business owner Sandi Murphy said it was"such a shock to receive the call late at night and I'm just really grateful no-one was hurt and nothing happened beyond the small area".
The yoga studio and wellness centre had a sophisticated fire alarm system, Murphy said.
"The brigade was alerted and the situation was very quickly contained."
From an initial fire investigation assessment, it appeared oil residue on towels and sheets might be the cause.
"It came from the drum," Murphy said.
"What we've had as an assessment is sometimes when there's residue oil from towels and sheets, because we have a massage business, it can overheat and combust.
"It's apparently not uncommon to have this happen in restaurants as well. It's something people could be more aware of across the board."
Murphy, who had been unaware this could happen, said all necessary precautions would be put in place to ensure no repeat.
Stanley St was temporarily closed and Brazz, The Speight's Ale House and the apartment block were evacuated for about an hour.
The large building, owned by former Queenstown mayor and cabinet minister Warren Cooper, contains several businesses and apartments.
Shift manager for Southern Fire Communications Brent Dunn said extra resources from Frankton, Arrowtown and Alexandra were called in.
The surrounding rooms and walls were checked.
Central-North Otago fire risk management officer Stuart Ide said he attended the scene yesterday morning.
"It was pretty much confined to the dryer and heat pump," Ide said.
"I'm just waiting for some more information tomorrow or the next day before concluding the investigation."
Murphy said the wellness centre was closed yesterday but could reopen today.
