Office?
Library?

If it were my space....I'd make it a home gym. I'd put a collapsible treadmill, a flat panel tv and a good radio in there. But, that's me. For you...? Wow, sky's the limit. Because you have reading area covered, I'd use it as a hobby room. Install a pull-down black-out shade, a foldable table for your photography supplies, and maybe some nice bulletin boards on which to hang photos, inspiration. Good luck. Please let us know how you end up using the space. --Tara

I presume the mattress will pretty much completely cover the floor when in use? If so, you can't put anything dimensional on the walls (so decoration only, nothign functional) and any furniture will have to move ifyou have a guest, so it should definitely be on wheels. About the only thing I can think of is either a portable bar for entertaining that can live elsewhere when the room is occupied, or a rolling (small) desk and chair.

I think I would have found a hide-a-bed loveseat that sleeps one and used the area as a tiny sitting room for reading, with a good lamp. Too late now!

work out room? (not like a treadmill room but more like pilates or yoga? you can do like a yoga/meditation set up there)

I'm not sure if I understand...the built-in closet is that odd rectangle in the wall, and you need to access it?

How about an Ikea-style futon?

Conversions: 200 cm = ~6.5 feet
180 cm = 6.25 feet
224 cm = 7.3 feet

I'd use it as a library-reading nook. Place a comfy lounge chair right under the glass block window along with a nice floor lamp for extra light. Throw in a small cozy rug to warm it up. You can also add a spine bookcase for extra book storage as well - they require no extra holes.
http://www.apartmenttherapy.com/chicago/shelving-storage/roundup-vertical-spine-bookcases-083090

Or...

Furniture that could act as a platform for the bed, when you put the mattress on it.

Maybe long, low benches along the walls? That you could roll into the center of the room, attach somehow, and put the mattress on top of?

Perhaps, long low benches plus a same-height low table in the center of the room? Think of them as puzzle pieces...

Something like:
http://www.ikea.com/gb/en/catalog/products/S19853443

Imagine this with a box cushion on top for everyday, non-sleeping use.

Some more options:

http://www.ikea.com/gb/en/catalog/products/S59852125

http://www.ikea.com/gb/en/catalog/products/80116600

http://www.ikea.com/gb/en/catalog/products/30086969

http://www.ikea.com/gb/en/catalog/products/00045560

Since it sounds like you need a guest room but not really anything else, I'd go in that direction. I would think you could probably fit a basic sofa bed in there and just move it from having its back along the wall facing the door for everyday use to the head of the bed along the wall to the right of the door for when people are actually sleeping in there. I'm defaulting to ikea for ideas for lack of knowing local stores in London, but here's a couple that might work:

http://www.ikea.com/gb/en/catalog/products/S69824957

http://www.ikea.com/gb/en/catalog/products/S69843748

From there, I'd finish things off with a couple pendant lights in lieu of table lights (since the space is so tight); a couple tiny bedside tables - maybe even plant stands; and a couple light curtains for the window; and a small throw rug, even a runner.

http://www.ikea.com/gb/en/catalog/products/10140769

http://www.ikea.com/gb/en/catalog/products/40126045

http://www.ikea.com/gb/en/catalog/products/10070262

If the only thing you're in need of is a photo studio you should run with that. I don't know what sort of photography you do, but that blank wall looks like it could be a pretty good background. Or if you wanted something seamless you could get a big roll of that paper backdrop, attach it at the top of the wall and then you could just pull it down for photos, but it's out of the way when you have guests. You could get a narrow bench or table which would still fit agains a wall with the bed down, that way you could use it for photography, but your guests could use it as well when the bed is down. If you could find some small studio lights those could be set up in there as well, but stored away when you have guests.

I would use it as a nice, empty meditation/yoga/stretch/journal-writing room.

I wish Maxwell would weigh in. I have the same dilemma. All the solutions offered so far lack pizzazz (spelling?).

Library!!! Floor to ceiling raw wood shelves!!! A big, mooshy, oozy chair. a sexy-ass floor lamp. No mas.

Thank you so much for all the replies!

I tried to fit every kind of double sofa bed in there, believe me, is just too tight.

I need access to the built in closet in the right wall because is where I keep a lot of things I need quite frequently.

Initially it was a reading room, but I noticed I never really used since I preferred the sunlight in the living room.

I really like the idea of putting a big roll of paper to transform it into a studio, but since the place is rented, I really don't see a way to do it without holes in the walls.

I seriously considered becoming a gym freak just so I could fill the place with gym equipments heh

Right now, I'm leaning towards making into a "japanese room", leaving the mattress in the floor with some big cushions around just to lie down in, with some small bookcases around (I would really like to find a thin bench that could fit near the block glass window)

again, thanks so much for the attention!

Put a cool rug on the floor and a few leather bean bag chairs.

Wow I wish I had that extra space :) How about making a lounge or meditation room (if you're into that), like a second smaller living room that could double as a guest room. Maybe using a chaise lounge like this in the room

http://www.cb2.com/family.aspx?c=102&f=3979

accessories/mudroom? I'd put all my shoes and hats and stuff up on display- maybe shelves across the windows and up the walls.

Den, library, office, TV room? Or it could be dedicated just as a guest room.

As for guest bed, how about a daybed instead? Or small futon? If you are just going to do the double mattress, maybe some furniture that could act as a platform for it, like very low bookshelves.

I would love to see the photography studio put in that space! Like Will Whiskey, I agree with the backdrop idea... but since you have an issue with putting holes in the walls I would use velcro for that also. You could even leave your backdrops up as an interesting and easily changeable headboard/artwork for your guests!!! The only difference is that I wouldn't have the backdrops be the paper ones...I'd choose fabric ones. They are a little more durable, you can throw them in the washing machine (velcro and all) if guests get them dirty, and you can hang each of them from hangers in the closet. Paper ones would have to be rolled to be put in the closet and possibly buy those huge storage tubes to keep them in there, which would take up more room. If you have room in the built in closet, I would make sure you can store all the photo equipment in there and store the more eye appealing equipment, like the camera's (especially any vintage ones if you have any), props and photography books and some of your photos on that book shelf! Hope that helps out!

accessories room
shoe room
dressing room
japanese / relax room
massage room
meditation room
room with plants
playroom for children
playroom for adults :-)
wine cellar room

If there's not enough room for a whole sofa, why not a sleeper chair or even sleeper ottoman? That way you have a reading space and guest room.

Two of these would both fit, even when open.

http://www.bedstar.co.uk/shop/catalog/Slumberland_Kip_Bed_Sofa_Bed-p-26130.html

And this too:
http://www.bedstar.co.uk/shop/catalog/Slumberland_The_Como_Two_Seater_Sofa_Bed-p-20319.html

home body -- ooh those look nice - too bad they are out of budget for me.

Lift the mattress off the ground with some sort of shelving or storage so that it is seat height. Get an attractive fitted sheet. If the room is already dark, I'd go with a lux bordello feel. Get a bunch of lightweight saris and thumbtack them to the wall to create layers and depth. Fill the room with as many pillows as you can.

How about a daybed? They sell daybeds with trundles as well, in case you have more than 1 guest. Here's an example:
http://www.potterybarn.com/products/p2558/index.cfm?pkey=xsrd0m1|20|||0|||||||daybed&cm_src=SCH

Then just add a small side table, with a plant or decorative lamp, and you're done.

I have the same issue with a weird walk in closet in my entryway - what to do with odd spaces in old buildings? I haven't found a good solution either. But your space looks much nicer, and has some light... if you wanted to take up gardening you could have a room for plants & put them on a cart of some sort so they could be moved out in case of a guest. I like the idea of putting pillows on the floor - almost like a genie bottle type environment where you can just relax. I think the photography room would be really cool - were you thinking of making it into a dark room to develop photos or just a place to take photos with a blank wall? Either would be doable and very cool. Or make it into an art gallery and display your favorite stuff on the walls. Good luck - I'm hoping I'll find some good answers here too!