Many - wearing only their dressing gowns - stood in Canute Place as firemen tackled the blaze at Oliver's butcher's shop.
One resident, Geoff Pullar, 62, told how he and his wife Pat were awoken by police pounding on the door of their flat.
The alarm had been raised by Sgt David Grindley, who had been on patrol in Canute Place at 5.18am when the fire broke out.
He spotted smoke, alerted firemen, then began evacuating residents living above the shop.
Leading fireman Paul Paton, who attended the scene, said: "There was so much smoke when we turned the corner we didn't know if the flats were on fire."
Another said: "You couldn't see your hands in front of your face. It was thick, black smoke."
The fire - caused by an electrical fault in a sausage machine - vapourised PVC wall coating and 2,000 plastic bags hanging above the front window.
Owner John Oliver said yesterday: "It looks like a war zone in there. It's knowing what to do first."
Debbie Cook, who had been cleaning offices nearby, said: "It was terrible. People must have been choking upstairs in the flats."
Residents were allowed back in their homes at 6.30am.
Mr Oliver said later it would cost up to £80,000 to repair the damage and replace the stock, but he hoped to re-open for business in three weeks.
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