Here’s Sherlock processing “Baker Street? He isn’t there anymore.”
Here’s Sherlock piecing that together with (1) John having fancy restaurant reservations, and (2) John’s dramatic change in appearance via moustache.
Here is Sherlock spotting John for the first time in two years, later that day. OBSERVE THE SUDDEN GRIN:
BUT THEN. Here is the next two seconds, shot from Sherlock’s point of view. John is dressed to the nines. We see him put a small box in his jacket pocket and take a nervous sip of water:
Now the camera snaps back to show Sherlock’s reaction to that:
That is the brilliant detective Sherlock Holmes, helplessly and immediately piecing together the ringbox, the suit, and the nerves with the fancy restaurant, John’s new home and the dramatic change in facial hair.
So that sad, lost face was not the moment Sherlock spotted John, but the moment Sherlock deduced that John was getting engaged.
Here’s Sherlock realizing it’s a good thing John was getting engaged, because now there’s someone to talk John into taking him back after Sherlock lied and made him watch him kill himself and let him mourn for two years and generally treated him so shittily.