In general I don't think it makes a room look smaller, but it also may depend on the dimensions of the room. This long and narrow kitchen may not be the right proportions, or it may of helped if the upper colored walls were a more contrasting color than the below beadboard.

Here are more beadboard ideas:

https://www.houzz.com/magazine/8-great-ways-to-use-beadboard-stsetivw-vs~170320

http://www.houzz.com/ideabooks/129711/list/beadboard

my question is this....Would it make sense to lower the framed tile piece a bit more? I personally dislike sitting flush with a wall, although lack of space warrants it here...just wondering what you thought on that.