Although the niche looks deep, you might think about built in bookcases. Remove the mirrors over the fireplace and put up a large piece of graphic art.

Is this a high traffic area? Need to center furniture so there's a clear path from one room to the next. Can't tell from the photo, but you might try painting the stair wall an accent color.

Thanks for the suggestions colonialgp! We haven't moved into this home yet. And the previous owners are yet to move out. So I'm just trying to brainstorm some ideas for the space. Looking at some ideas online, niche could be the place for media center right? Although I don't like the way its at the corner, but somehow I will have to make do with it for the time being.

This is the family room and the access to the space is from the right to the entrance corridor where the hard wood floor is (photo 3) and on the bottom left leads to the kitchen. So it could be a heavy traffic area.
The graphic art is a great idea! For fire place i was thinking of removing the existing tiles and use something else. Any ideas on that?

Removing tiles might be kind of drastic at first. I'd wait to see how the paint, art and furniture work out before blasting those tiles off. Going back to the niche, those bookcases could hold your media center,along with books, collectibles, storage, etc. Only troubling factor is whether tv could be viewed comfortably by all in the room. And the other end of that rug is facing the kitchen? Do you have a photo with your back to the fireplace?

That makes sense too. But we are putting hardwood floor on the entire ground floor except kitchen, so thought changing the tiles on fireplace would bring a little more charm to the space. I don't like tiles that are put now. They look too cheap.
The attached 2 pics show the room with the back facing the fireplace..

If you really want to get rid of the tiles now, I'd omit them entirely and go for a simple line around the fireplace opening. That would keep within your contemporary guidelines.

It definitely looks like you have some room to put a sofa and chairs for tv viewing without impeding traffic. Possibly swivel type chairs so you don't get neck pains when twisting around to see the screen.

Ignore trying to attract attention to the fireplace since it's in the corner. Using swivel chairs will allow you to cozy up to it when you want. Center a rug around the furniture, leaving a path directly to the kitchen. Hope this helps.

Any photo suggestions of what you mean by simple lines for fireplace?

I like the idea of implementing built in shelves in the niche and use a material that facades the fireplace face and continues into the niche. This will help tie the fireplace together and make it feel more like it was meant to be all one wall vs. over in the corner. Also agree with art and objects to help make it more personal. I'm a designer + fabricator with steel as my main medium, so I attached some fireplace facades that I've worked on to help spark some ideas! Good luck.

What is the material of wall used in the last pic? Is it polished concrete?

All surfaces are hot rolled steel with a clear coat. The heat marks are a lot like wood, random. The two photos with hearths are concrete by Cement Elegance.

Actually we have not yet moved into this home. This is the family room and I'm looking for some ideas to treat the fireplace wall with something a little more modern. Removing the half wall will be great as you say but this space is double height and kitchen next to it is just single storey height. Wondering how it would look like