Just after midnight on Thursday, emergency crews received multiple calls about a fire engulfing Tamar Marine, a boating supplies business in Trevallyn, central Launceston.
Firefighters found a large portion of the building already on fire with most of the flames coming from the second storey.
The crew of 30 firefighters battled the blaze for two hours before it was brought under control.
However, efforts to fight the fire were hindered by the extremely low levels of mains water at the scene.
Crews had to resort to pumping water from the nearby Tamar River to access enough water to slow the progress of the fire.
During the effort to bring the blaze under control, flames spread to the adjoining business, Almasts Australia, and a slipway warehouse which were both destroyed.
Damages from the fire are expected to reach up to $5 million, Tasmania Police said.
An excavator will be brought in today to fully extinguish the fire but there is no threat to residential properties and nobody was injured, emergency services said.
Tasmania Fire Service investigators will be on scene to begin their examination into what caused the fire.
A large amount of smoke is expected to be visible until about lunchtime but all roads in the area are now open.
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