Lestrade accused Pendry of killing his wife, so Pendry's father used the power of "half the newspapers in Great Britain" attacked Lestrade and also Scotland Yard, and Lestrade was fired. And then he showed up at the funeral with a grenade. Holmes can tell at a glance that it's a fake. Anyway, the point is that Holmes has not been asked here to investigate the death of Mary Pendry. He's just supposed to find Lestrade, because everybody's a little uncomfortable with him being missing. As Holmes and Watson are being led out, Lawrence Pendry shows up for a meeting with Hopkins. He recognizes Holmes as "Lestrade's crutch." He claims that he wishes Holmes had still be in London: "Maybe the real killer would be in prison. And the inspector would still have his job."
Holmes has now taken Watson to his old lodgings: 221B Baker Street! He claims it's the only place in London that he missed. But everything should be in order, because someone named "Geezer Bob" has been watching it for him. As they go up the steps, he warns Watson that entering 221B will be like going into his mind. He transformed this place into a womb of creativity. He's going on about texts in dead languages and scientific experiments, so naturally when they get inside, it's all been redesigned to look like an IKEA catalog. Holmes declares that he's been betrayed and runs upstairs.
Watson idly looks out the window. And in this weird pause, a gentleman walks in and asks why she's there in his apartment. Sherlock runs downstairs, because he's realized who lives here now: it's Mycroft! Played by Rhys Ifans! I always enjoy a good Mycroft. Sherlock (I'm calling him that instead of "Holmes" because there are two Holmeses in the scene) does the introductions: "Fatty, this is Watson. Watson, this is Fatty." He demands to know why Mycroft no longer matches the name "Fatty," and he rejects Mycroft's explanation of exercise on the grounds that exercise requires energy and ambition. Mycroft introduces himself as Sherlock's brother, which we all already knew from him being Mycroft. Say, the Holmeses have weird names, don't they?
After some commercials, Sherlock is still cranky that his father gave 221B to Mycroft. I think Sherlock should consider putting together his own fortune, so his weird offscreen father can't take away his stuff. His complaints about how lazy Mycroft is stem from the way Mycroft cashed in his trust fund and opened restaurants. Mycroft comes in with tea for Watson. Sherlock asks what Mycroft did with all his stuff, and Mycroft cheerfully says that he gave them to charity shops because Sherlock didn't answer any of his messages. Mycroft claims his father's mentioned Watson several times. When she asks why Sherlock never mentioned his brother, Mycroft speculates, "Maybe it's because the last time I saw him, he was face-deep in my fiancée." Sherlock protests that it was five years ago, and he only did it to prove she was a gold-digger. Watson decides they should find a hotel, but Mycroft says they can stay in the guest rooms. Watson tells Sherlock, "We've been up for over twenty hours. It's nice here." Sherlock goes off to test a theory on how to find Lestrade. But really to get out of the situation where his precious 221B is occupied by Mycroft.