By Tina Burnside and AnneClaire Stapleton, CNN

(CNN) -- A "disgruntled employee" was holding hostages Thursday after shooting one person at a restaurant in downtown Charleston, South Carolina, officials said.

"This is not act of terrorism," Mayor John Tecklenburg told reporters Thursday. "This is not a hate crime. It's a disgruntled employee who has come on the scene of his employment."

Several hostages are holed up inside the restaurant, spokesman Charles Francis of the Charleston police said during a press conference, describing the scene as an "active shooter situation."

Police are asking people to avoid the area near Virginia's on King, a Southern-style restaurant in the heart of downtown.

Still, onlookers could be seen gathering around and taking photos and video with their cell phones.

An owner of a nearby boutique said the police activity is focused around the restaurant.

"Right now the streets are full of SWAT and police and people heavily armed. They are blocking off the whole block," said Sarah Cobb, owner of MOSA boutique.

Cobb described evacuations of nearby businesses and officers with guns pointed toward the restaurant.

Sandy Troeder, who works at a hair salon across the street from Virginia's, told CNN affiliate WCIV that she saw police and a SWAT team break down the restaurant's door and enter with dogs and machine guns. Police carried a body out, but she couldn't see who it was or if there was blood.

Police later came to the salon and told people to evacuate. Andrew Locke, another salon employee, said the situation was "nerve-wracking," especially in trying to take care of customers.

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