Sydney's CBD a ghost town

Martin Place and much of Sydney CBD was locked down after the attack at the Lindt Cafe.

A Napier woman under lockdown inside a Sydney office building endured an anxious wait for a terrorist's next move as a downtown siege developed.

Former Napier woman Kate Hulbert was sealed in her office building with her NobleOak Life Limited workmates by police after news of a hostage situation at a Sydney cafe broke.

"It's terrible we are on lockdown and everyone is pretty scared, who knows what is going to happen," she told Hawke's Bay Today yesterday from her CBD office, just moments after the incident began.

As of last night there was an undisclosed number of hostages being held by what was believed to be a lone gunman at the Lindt Chocolate Cafe on Martin Place.

Police say there are fewer than 30 customers and workers inside the cafe, who were seen with their arms in the air through the cafe's windows.

An apparent Islamic extremist flag was also being displayed in a window.

Last night five of the hostages had fled the cafe and it was unclear whether they had escaped or been released.

Witnesses described how a man wearing a headband covered in Arabic walked into the cafe and produced a shotgun about 9.45am.

Miss Hulbert said she first heard a report of a hold up at a store along Martin Place but initially didn't take too much notice of it.

"Then we heard siren after siren and the streets started to empty, it was scary. We knew then it was serious."

Her building was a couple of streets away from the Lindt store but armed police had confined her building's tenants to their floors after reports the gunmen had multiple explosive devices, said the 21-year-old who has been living in Sydney for two years.

"The scary part is they are saying there are bombs planted around the city so they could be anywhere - There is no one on the streets it's just a complete ghost town. Everyone is just too scared to go outside."

She said police posted warning signs on the doors of all the buildings within the siege zone, and office workers were instructed to stay away from windows and doors.

"We are just sitting around a TV watching the news - Watching Tony Abbott, waiting."

The Australian Prime Minister told a press conference that it was unknown if the hostage situation was politically motivated "although obviously there are some indications that it could be".

"The whole point of politically motivated violence is to scare people out of being themselves. Australia is a peaceful, open, generous society - nothing should ever change that and that's why I would urge all Australians today to go about their business as usual."

Live television footage, which continued throughout yesterday, showed staff and customers inside the cafe forced to stand with their hands pressed against the windows. New South Wales police commissioner Andrew Scipione said it was unknown how many hostages had been taken but police last night confirmed they had made contact with an offender, but would not say how many were involved.

"We are at this stage continuing to secure and make sure we're doing all that we can to bring this to a peaceful outcome, we want this matter resolved peacefully and we will do all we need to to ensure that," Mr Scipione said.

The Sydney Opera House was also evacuated, searched and cleared after reports of a suspicious device and a no fly zone was enforced over Australia's most populated city.

Miss Hulbert was allowed to leave her office building at about 4pm (6pm NZT) yesterday. Her employer provided lunch and other amenities.

"We just had to carry on, there was really nothing we could do - otherwise everyone would have just started panicking."