Step by Step Instructions:
STEP 1: To create a wall niche you'll want to click on the wall and enter the "wall editor".
STEP 2: Use the rectangle tool at the top and draw the niche where you want it on the wall.
STEP 3: Next you want to go to the bottom right corner of the wall and use the "extrusion" space to extrude the wall with the depth of the niche. You need to bring the wall out and it will leave the rectangle back, creating a niche.
Note: you will lose a few inches in the space when you do this.
STEP 4: To pave or apply materials to this area, click on the rectangle and enter the Pave editing area and select your finish from the side.
To apply material to the inner sides of the niche, click the line of each side and you'll see an area on the left come up where you can select "edit elevation" and that will let you pave the sides. (see below)