If your willing to do tile work and spend on a mantle why not redesign the whole thing. A mantle above is not going to work and tile is not going to change the look to something that makes sense.

I agree - redesign it and bring it down. You can then do something beautiful.

I would add shelves in the niche. Dress the shelves. If you want, add tile surround on the front and sides of lower section and in the niche. Then add shelves.

IMO that space is pretty useless and I certainly would not want to draw attention to it . So move the FP down where it should be and tile that wall and hang a great piece of art on it and be done,BTW I hate corner FPs always so I often ignore them when arranging furniture.

Sorry to go off topic, but I love your rug. Could you please share your source?

Is there any technical reason for it being so high up?

How hard is it to move it back in case it was at some point moved up?

I'd either go for a full redo if I had time/money/energy/desire to do that, move it down, etc -or if leaving as is, would add a shelf or even a basket/cool bin for books in the niche, and call it done. Or nothing at all.

Does it get regular use?

Thanks all. I wish I knew if there was a technical reason for it to be up so high. I'm in a 15 year old townhome, not the original owner, but the fireplace has been in that position since the house was built. There's technically another unit on the other side of the wall. I was hoping to come up with something that worked for the fireplace as is before I tear it down and see what's behind it, but I agree that I'd rather have it in the lower position.

I don't remember exactly but I believe the area rug is Lucienne Geometric on Wayfair

If you like it that high and want a unique design I would do shelves or cabinets in that nook. you could also do baskets (throws or pillow storage. Not sure of the overall look but I feel like it needs pillars or wood posts up the sides of the top.

If you are looking to change it to a more traditional look then yes, lower and lots of options!

Hope that helps!

If bringing it down is not feasible, I wonder if putting doors on the bottom part and painting them out to make a shallow cabinet would make it less noticeable. If you don't need the storage space, another option might be to just drywall over the hole, add more baseboard and forget it is even there

I think tile would look great on the entire bottom half, including niche area, with possibly painting the upper half an accent color (or leaving current color).

I’d use the recess for birch logs. Keep it simple. I think it’s a cool design.