Ask your contractor if the water heater and furnace (?) can be moved into the lower right corner of the utility room. If so, I'd have him frame them in to a utility closet, leaving the rest of the room open to create a guest bedroom. That said, if this is going to be an oft-used guest space for sleeping, you're going to need another form of egress to meet code. Have him add another window in the bedroom area and make sure the window is large enough for someone to get out of in the event of a fire.

Thanks! I'll ask the builder.

Unless you want to forego watching TV while guests are there you need to have 2 spaces

i'd be concerned about storing a murphy bed in the wall of a lower level space. seems it might be a bit susceptible to picking up a damp odor.

Ah, that makes sense about the murphy bed in the basement. I think I'll just make it into a big media space and ask them to get rid of the small bottom utility/storage space. I can put do a built in against that wall, right?