"The Apartment 34 office now serves three purposes. a hangout with a magazine space; and, with a few quick moves, the couch folds out, and voilà — we've got our guest room!" Small Apartment/Home Office Hacks.
This is a nice-looking living room with smaller rug. Perhaps the key is to frame the rug with sofas / sofa and armchair combo / sofa and the window. And another trick is to fill up the room so the size doesn't look awkward.