A construction site fire that sparked thousands of evacuations and traffic chaos in Sydney was still burning overnight, but officials said it was safe to reopen major roads.

The blaze began at the Barangaroo site in the city's CBD about 2:00pm on Wednesday.

It is believed a welding accident sparked the fire, which had authorities concerned that the intense heat could cause a crane at the site to buckle and collapse.

But police said engineers working overnight had certified the crane's integrity, allowing the reopening of the city's Western Distributor.

The road had been closed in both directions between the southern toll plaza and King Street, adding to gridlock across the CBD which persisted well into Wednesday evening.

Sorry, this video has expired Fire at Barangaroo construction site sees offices evacuated ( Kim Landers )

Overnight, temperatures around the fire dropped from 1,000 degrees to 45 degrees, allowing crews to move back in and tackle the seat of the blaze.

Superintendent Ian Krimmer from NSW Fire and Rescue said fire crews pointed laser beams onto the crane to detect any movement.

"Should they detect any movement, they'll set off an automatic alarm which will give us some warning should the crane collapse," he said.

"At this stage I want to emphasise it's not imminent that there could be a crane collapse but we do have to treat it as a worst-case scenario."

He said crews had poured water onto the crane to keep the metalwork cool.

"We have to assume there may have been some structural damage to the crane... our priority is to keep the community safe," he said.

Unions have called for a safety audit of all major construction sites in the city.

Unions New South Wales secretary Mark Lennon says it is the third major incident on a Sydney building site in the past 16 months and there is a problem with safety standards across the industry.

CCTV footage showed traffic on the Sydney Harbour Bridge at a standstill. ( Supplied )

Earlier, hundreds of workers from the KPMG building and nearby Macquarie Bank offices were evacuated.

Superintendent Krimmer said it was not feasible to tackle the blaze from the air.

"This is what we call hard-grunt firefighting," he said.

"This is a contained space, there is absolutely zero visibility, we are trying to use thermal imaging cameras to look into the basement area. The temperatures in there can't sustain human life, but those fire crews are doing it tough to try and contain it. This is a matter of firefighters with hose lines getting in there and tackling it."

Michelle Baltazar, who works nearby, described how firefighters were leaning over wooden scaffolding to fight the fire.

"They're hanging over the edge to hose the fire down," she said.

Superintendent Krimmer said Darling Harbour and surrounding drains and waterways were being monitored for any dangerous substances.