If you want kid-friendly, use grass. It will contrast nicely with the areas on either side.

Grass is not drought tolerant so if that's an issue we had rock mulch in our front and back yards for the last 20 years and our kids and dogs didn't seem to mind. There is also some high quaility artificial turf available that would give the green grass look but I do love the gravel look personally. We have a lot of different natural colors available here but you would need to check out your local options.

Artificial turf is hot on the feet and gravel is rough on kid's skin when they fall. Grass is not forbidden in Ca., but it's not a good idea to plant thirsty, cool season grass. UC Verde Buffalo grass is low-water use and there are some native fescues that don't require much water. https://californiabuffalograss.com/

I was unfamiliar with Kurapia. It may even be a solution to another part of the yard. Thanks for bringing it to my attention. Still trying to appreciate artificial turf....although I do agree, it's come a long way!

PO didn't state that he was in California.

Meant OP.

But they posted to the California Gardening forum. That and the zone 9 indicator are pretty reliable signs, I'd guess :-))

I would check locally on grass varieties and mixes. I put in 1600 square feet of lawn, using a blend that the local sod farm recommends for my zone 9 location. It's a very small lawn, I can mow it in less than 30 minutes with a battery operated mower and it doesn't use that much water. IF you want a place for kids and dogs to play, nothing beats turfgrass. But the concerns voiced here are legitimate, so see what kind of grass is available and exactly how much water you are talking about. Your space is small - less than 1/2 of mine - but it would provide an ample play area and a rest for the eyes. I looked at all of the artificial grass options that i could find before I put in the lawn and they all got hot when in the sun. Turfgrass actually stays cool.

I have read that about artificial turf, and actually the uses I've admired are usually small patches in pristine front yards with some "real" landscape around it...kind of like sticking an artificial flower or two in a mixed bouquet. I'm learning there is a lot I don't know and appreciate the advice from this forum. I'll talk to my local (9b, CA) experts too! (Am I the only person who actually LIKES mowing grass?:)

That Kurapia looks fantastic. I'm jealous since my zone is just a little too cold for it (and I've been looking for a grass substitute). Another option would be to make a paver pathway and surround it with grouncover like creeping thyme (which doesn't tolerate heavy foot traffic)

Here is an off the wall idea to consider. Fill the negative 'lawn' space with sand. Your landscape plan looks like the surroundings will be densely planted. A sand bed could look nice in a lush xeric garden. Look around and there could be some local color and texture options.

Maintaining it should be relatively straight forward with minor adjustments for your conditions.

Look into stepables.com . They have drought tolerant groundcovers that are "stepable"

Re: grass. I have been thinking about some similar issues, and one thing is, you'll need to know how much sun you get. Some of the new hybrid grasses need a lot of sun.

Also, if you are feeling bad about water use, you might look into a gray water system. I don't know diddly about them - just that they exist.

But, if I read you correctly, you are asking about the area in the photo, which is above the 4' retaining wall on the drawing? Bc maybe it does seem like a good place for one of those rain-permeable fake lawns. I could see youngters playing soccer in that space. Practice their pitching. All kinds of things. Just my two cents.

Yeah, many of the grass comments make me realize I don't know what kind of hybrids have been developed in the last 15 years or so...so I am going to see what's out there. And yes...this area was always our kids' "slip and slide" runway!:)