A small room can be elegant. What little princess wouldn't love this cozy nook. You could use a secured wooden shelf (IKEA), some curtains, and a twin or toddler bed. The sconce doesn't have to be hard-wired. Don't have a little princess? This would be perfect in an office for a guest. A trundle bed would allow sleep space for 2.
Great office nook by Whimages. other pinners said: Not that I have an empty closet, but I do like this "Closet Office" - Turn your unused closet / nook into an office space. Maximise the little space with lots of shelving and storage.