In my case, muscle mass reduction wasn't terribly noticeable by others, but I noticed it myself. While the appearance of my muscles hasn't changed (and if they had visibly shrunk, I would look really strange), I have noticed that I'm not as strong as before.
Perhaps the muscle was replaced by fat, thereby preserving the appearance of somewhat normal arms. I imagine that in someone more built, the being-replaced-by-fat part would probably be skipped, reducing the appearance of muscle overall. I've seen it enough times, after all...
... but then again, HRT is quite variable. I'm not sure if there's much that it does universally, aside from breast growth. And breast growth is only a fact in itself - there is not much way you can expect or determine your potential size.