Fire crews spent one and a half hours putting out the blaze in a derelict building.
Guernsey Police say they have arrested and have been questioning two young people after a fire at Leale's Yard off the Bridge.
Fire crews were called at 5pm yesterday (26 March) to the northern end of the site opposite the Power Station.
A granite building with a corrugated iron roof can be seen on fire after pictures were posted on social media.
It took crews till 6.30 to dampen down the blaze and people living on the Bridge were told to close their windows to avoid breathing in the smoke.
Leale's Yard sits behind the main Bridge shopfront and is now majority States owned, with a section still held by previous owners the Channel Islands Co-op.
It is destined to be a major housing development although flood defences need to be put in place to protect it, as it is low lying.
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