I had a similar space above my fireplace in my previous home. It had endless possibilities for Christmas decor. The remainder of the year you need to use your imagination. Just remember that scale means everything.

Another picture of the space

Wall it in. Flat

It makes no sense unless you want to keep it and do as suggested with seasonal decor. Close it up and hang a fab pices of art there

Agree that walling it in is best approach. It would be great if you could find a way to access the resulting cavity for storage, perhaps from one of the other sides? What is behind the fireplace?

Walling it in makes it MUCH easier to decorate.

CLOSE it up, with good old studs and drywall. It's a nothing. No purpose, other than when a tv had a depth of thirty inches : ) Say tata to it and hang art

Wall it in

What room is on the other side? Does it make sense to close the LR side and open the other side for shelves, storage or a bar/coffee station? Just a thought

Thank you for all the ideas! I struggled to find big enough furniture and how to best fill the room with furniture as well. The rug is 8x10 and the couch is 10’ long but i still have a lot of extra space.

The other side of the niche is a hallway that leads to a bedroom. Extra storage would be nice but a deep niche would also seem oddly placed in a hallway, no?

I like it. I would add layered artwork and a plant or two and then smaller photos.

This gives an idea of why the furniture is arranged in two groupings- I didnt want to cut off the entrance to the kitchen

A "deep niche" on the hall wayside Is potentially a shelved linen closet with a good looking door : )

And a lot more useful storage. Deep enough for extra bed pillows, out of season heavier bedding,etc.

Your wall color, sofa color, is doing nothing for the flooring. It's crying for some real color as well.

Again......draw and measure and show surrounding adjacent spaces.