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The fire was reported just after 11 a.m. near Scott Boulevard and East El Camino Real, according to the Sunnyvale Department of Public Safety.
Santa Clara police say it's unclear if the person detained was responsible for starting the fire. Even though they were released the investigation continues.
A worker trying to escape the blaze was injured when he jumped from scaffolding to escape the blaze. He was transported to a hospital with a leg injury but is expected to be ok.
Jayson Vazquez, a construction worker, said he was on the second floor working on the finished apartments when he heard someone yelling "fire!"
"I seen him grab the fire extinguisher," he said. "I was looking for a fire extinguisher to go help him, but as soon as I seen him throw the fire extinguisher I told my co-worker, 'let's get out of here.'"
Vazquez said he went back inside when he realized his friend was still in the building. When he looked on the top floor, he saw the entire fourth floor in flames.
"I got two daughters, you know, so I'm just thankful that I made it out okay, you know, and that I get to see them."
VIDEO: Crews battle massive blaze at condo under construction in South Bay
VIDEO: Intense flames, smoke at condo under construction in Santa Clara
"There was some talk that someone could have been soldering on the top floor," he said.
Fire officials said firefighters stayed throughout the night to put out out any hot spots that may pop up.
"The radiant heat from this fire was intense and was starting to make the buildings in the area smoke a little bit, and so our first action was to put water on the surrounding neighborhood and then attack the fire here," said Capt. Bill Murphy with the Santa Clara County Fire Department.
Nearly three dozen firefighters were on-hand trying to keep the fire from spreading.
"A building, the size you see burning puts out a tremendous amount of energy and heat when it burns and so it really does present a risk to any of the surrounding structures," said Capt. Murphy.
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"It also sends a tremendous amount of debris up into the air into that smoke column. It is fortunate that it's a cooler day. The humidity is relatively high."
The condominium complex was reportedly under construction for about one year. The building, known as the Anantara Villas, was to include a mix of 58 affordable and market-rate condos.
"We will do what we can to expedite the process and help the developers to get that back online as quickly as possible. We are in a housing crisis, and that was an important project in our city," said Santa Clara Mayor Lisa Gillmor.
Santa Clara Fire Department is receiving additional help from Santa Clara County Fire Department and San Jose Fire Department.
El Camino Real was closed between Scott Boulevard and Lincoln Avenue but has since been reopened.
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Motorists were advised to avoid the area and use alternative routes.