Thanks everyone. I really appreciate all the advice. I am currently getting quotes on a tankless water heater. Mine is a 18 years old gas system. If I can create enough space for a countertop or bench that really adds value to the room and justifies the extra cost, I will upgrade. Otherwise, enclosing a new traditional water heater is also a possibility, since I’ll likely replace this one very soon. I was thinking of stacking the washer and dryer so we could have a bench to sit on to tie our shoes or wait on. However, I believe my dryer duct and electrical cord for the washer could reach it I did side-by-side. I like the look of a side-by-side with a counter over the washer and dryer, and perhaps if I upgrade to a tankless system, do a corner bench where the current traditional water tank is? We also have that big white cabinet next to the stairs to go into the kitchen which we could do something with. That is poorly put together and needs to be fixed.

We put brown paper where the washer and dryer are going. My husband is going to build pedestals for them to sit on which will make the tops of them be about 50” up from floor. Any ideas on the pedestal and can shelves go above the units and beside them? The empty space shown on left will be 18” wide. Does it matter if units are white or gray?

Lot's of ideas. (i'll address the closet in another comment) Right now, the sink and the appliance wall and floors: sink is always good to have. I wouldn't get rid of that. You can do something more vintage looking, Paint your cabinets, do a wall of subway tile (or any tile) get a drop in farmhouse sink, cabinet base Or how about this makeover for $100? https://timelesscreationsmn.com/diy-utility-sink-makeover/ This one is cool too. You could do a shelf over the back of your washer dryer. see how they did this one? super easy w/a 1x8 piece of wood and pipe parts. or just support it w/brackets into the studs. other sink and wall ideas Love these colors. find a sink like this, a sink base (get a used one, modify it and paint it) add the shiplap surround (to do it on the cheap, buy the cheapest pine floors from Lumber Liquidators, (it's less than $3 a sq foot) and put it on the wall. prime and paint. I used it on the walls inside our trailer. looks great on the wall, the ceiling ) Do a cool shelf above the sink. For your floors, Paint and stencil the tile. Before and After. (go to Royal Design STudios, or CuttingEdgeStencils for tutorials)

Following up my earlier comment…if you pull the cubby into the middle of the space as a partition, there are lots of options for the desk…on the dark wall (monitors/wires will disappear/blend in); facing the back of the cubby (which could be trimmed out/painted/wall papered/decorated or covered in cork as someone suggested; or perpendicular to the cubby partition, especially if there is a window with a view on the wall we don’t see in your photos. Don’t worry about the monitors…arrange your desk in the position that feels most comfortable for you while you are working. The mudroom cubby area should be on the side closest to the door into the room, which I’m guessing is on the right since that is where you placed the cubbies. The good thing is you can move/tweak the placement of your desk and the cubbies until it feels just right for you! I would anchor the office space with a rug and place the chairs and the mirror (vertically) in the cubby space. You could do a gallery wall on the dark wall. I think it has a lot of potential and makes good use of the room!