The building collapsed, after which an aerial appliance was used to put the fire out from a distance.
Crews from six fire trucks helped to bring the blaze under control.
Mr Smith said rain would be welcome, because the asbestos could not become airborne if it was kept wet.
"The asbestos at the moment is actually on the grass verge and the road immediately surrounding the property, and the local authorities are currently working on a plan to clean that up and make that safe."
Rotorua Fire Service senior station officer Richard Anastasi said all the firefighters' gear had been sent up to Auckland for cleaning and decontamination.
He said about 30 firefighters attended the blaze.
The cause of the fire is being investigated.