Hello! Looking at the size of your space and the proximity of it to your house, you have a few options to spice up that part of your backyard. Depending on where you live or how often you spend your time outside, a gas fire pit would be a great option to fill that space. Gas fire pits can be hooked up using liquid propane or natural gas. If you choose to install via natural gas, you'll never have to worry about maintenance and it will provide continual, easy use. We offer a variety of models/sizes/shapes of gas fire pits at outdoorrooms.com. Good luck!

If you have children it would be a great place for a play area with a splash pool, sandbox, astro turf, etc. If there is a gardener in the house you could build raised bed gardens for basic vegetables and herbs with a few flowers thrown in. I would plant med height evergreen bushes between the area and the patio with mulch to keep any weeds down.

Pool? Looks like you could do an above ground that’s level with your patio.

If not that I’m a big BBQ fan and that looks like a nice area to setup an outdoor kitchen area with your preference of tools (while I’d love to have a nice big offset smoker there’s a wide range of things to consider... pizza oven if you have the interest and energy!). Having a fridge or sink in your outdoor cook area is really nice

Outdoor theatre sounds like a cool idea to me as well, although if it was me I imagine I would end up not getting enough use out of it

If none of these maybe just reclaim some of your grass area, maybe bring in some fill and rail road ties and make the step down a little less. Nice to have more space to throw a ball or play a yard game