What should I put in this corner?

I'm not sure what to put in this corner. It is between our living area and our dining room and is right now holding our blankets. Each wall is about 28" long and 78" tall and forms a perfect corner. There is also an outlet near the floor that is operated by an wall switch.

We have two small dogs, no children, a lot of books and a lot of knick-knacks. We would like to do something that involves storage and a spot for our dogs to hang out or store their toys (like a small cave). We are open to small DIY projects, like painting, hand-sawing and putting up shelves, but we are no carpenters! We are looking to spend under $200 and are very willing to buy things 2nd hand.

We already have an office, so we don't need a place for a desk. It's not clear from the photo, but there is not enough room for something like a chair to stick out of the corner.

I can't wait to hear your thoughts!