12x18 is not that small. And I hope you meant 9 FOOT ceilings instead of inch. Many of us have 12x12 or even smaller living spaces. Center your seating on the fireplace with the sofa back to the island.

Sorry yes , 9 ft ceilings .
We did live in NY in apts and condos and I understand that I probably sound spoilt. It’s just that this is a 3800 sqft house and I failed to realise that this is a smaller and only living area in the house. I just wanted suggestions on couch configurations that will work.btw the fireplace is super high for that space as well. I am worried that this will create neck strain.

I see afew issues and that size LR is really not one of them but we need pics so once you have the space post some pics and along with that a few clues as to your style IMO a 3800 sq ft house is 600sq ft bigger than mine and mine is just better planned

Why are you worried about neck strain? Are you thing of putting the tv above the fireplace instead of in the built-ins?

I would put the TV to the right of the fireplace. You could also remove the wall between the mudroom and the family room.

12x18' is not small but I do think we forget how much space walkways take up in open concept living, so the furniture space is much smaller. Sofa facing FP but TV in one of the built-in on a swing arm (or on the short wall perpendicular to FP). Chairs on slider side and maybe across from them too (small footprint short swivel chairs may work so that TV is not blocked, eg but would be extra seating if needed.)

Ok take a deep breath. This room is not that small for living spaces. We're doing a custom home with two living spaces that are 12x14. Our spaces have walls, which means we're not sharing walkways with other space, so the space is a bit easier. But still, they are not large, and they will meet our needs. So, do exactly what @Gcubed suggested for your furniture if you want to watch TV in that room. ALSO. You have a dining room and a breakfast nook and island seating. Do you need/want 3 dining spaces? That's a lot of real estate for a space you'll use for typically one hour total every day. A lot of people who have this set up do not use their dining room, except on special occasions, which in your case would mean you're saving 170 SF of your house for 2/3 days a year. That's an expensive room if you do cost/use! We use our dining room all the time and opted not to have a breakfast nook and instead have 2 living spaces. So, you can always convert one of your dining spaces to another living space, either by creating a comfy conversation nook in the breakfast area, or using your dining room for a TV room. Just because it's labeled "dining room" or "breakfast nook" doesn't mean you need to use it for that purpose :) Since it's still being built, you may be able to adjust the lighting to suit your purposes (obviously TV rooms or conversation areas don't need dining room fixtures).

All - thank you so much for taking the time to comment and provide your input. Really appreciate it . The house has a guest suite on the first floor , possibly why the living area is so constrained . But I agree with Patricia , could have been designed better. Yes, unfortunately, the builder put the Tv point above the fire place, that’s why we are being forced to consider the tv above the fire place. Also the built ins are only on one side and they are slightly deeper , so I was not sure if it would work for the tv , but I will surely consider gcubed idea for a swing arm. Is there anyway I could remove the perpendicular wall and make this more efficient like houssaon suggested ? I feel like a lot of space got wasted there . But it also is the space for the cubbies , which we don’t want exposed to the living area. Here are some additional pictures if that would help ..

Also thank you anj_p, I really appreciate your thought about the dining room. I was thinking about that as well - to convert the study or dining into another living space. The way this island is set up , it will be very hard to do both bar stools and a reasonable living area I think . I will probably have to give up on the island seating.

The TV can be put wherever you want it so forget above the FP get a nice cabinet low enoght to bring the center of the the TV screen to eyelevel whaen you are seated and put that on the other s de of the fireplace in fact I would tell the builder to forget the builtins and get get 2 matching cabinets one on each side the TV above the one and a nice piece of art above the other

So your room is actually bigger than 12' wide if your plan is correct. I would say it's probably closer to 14', which is almost exactly the layout of our current living room. If you put the back of your couch 10' from the fireplace, you can put chairs at your island and you will have plenty of room for a coffee table and a couch, plus flanking chairs (one on each side). I would not remove the wall to the mudroom, as IMO you will get nothing from doing that since the space needs to be used as a walkway anyway, and it's there to hide the mess of coats and shoes. You can mount your TV on the wall adjacent to the fireplace and just run the cable over to it.