Construction of the new citizenM hotel in Lavington Street took a major step forward this week when a crane delivered the first set of prefabricated rooms.
The Dutch "affordable luxury" hotel chain bought Surrey House from Workspace Group for £4.5 million.
Planning permission for the new 191-room hotel was granted last summer.
The northern end of Lavington Street has been closed to traffic to allow a crane to drop the prefabricated rooms into place.
The modular rooms are made in a European factory and bolted together on-site. Each room is 14 square metres and includes a king-size bed and rain shower.
Last year CitizenM's Menno Hilberts told Southwark's planning committee that the hotel's pre-assembled rooms are "almost like a luxury yacht crammed into a small area".