What should I do?

You mentioned you are re-doing shed and fence - does that mean re-building? Could you make shed bigger or fence smaller? Or are you looking for like a ground cover plant that likes shade?

I'd plant ferns. They like shade.

You could get a roll of bamboo fencing and actually tie that to the fence. That would give you more privacy. That would be a nice area in the summer heat since it is shaded. You could put pavers down and make this an seating area. Add some chairs and a small table. Amazon has some beautiful outdoor wall art and that would look great on the side of the shed. I am going to order some myself (love the butterflys).

Of course why not paint the shed first and repair the rotten boards toward the bottom before the rot gets worse.

There are plenty of plants that like shade. Visit your local nursery to learn about plants that grow well in your area.

You could fill in that area with pea gravel or smaller rock. Any water would still drain through the rock and week control could be taken care of with chemicals or a more natural alternative like vinegar. You could still plant some ferns if you used some in ground plastic garden edging or bricks/blocks to separate an area for the ferns. Adding rain gutter to your shed roof will help keep the water away from the side of your shed.

This could be a cute little shaded area for sitting. I'd think about a fence and add some shade loving plants. It could be a lovely oasis.

The pea gravel would be a great place to start, it will help with the muddy conditions there. Pavers would be a step up from the pea gravel if you want to commit to a more permanent ground cover.

One thing to consider is to have the tree trimmed, that would add more sunlight and keep conditions drier.

Lots of potential here, great project, enjoy the planning.

Pea gravel or some other material that won't hold moisture. Then you could put some shade loving plants in pots settled into the gravel.

Is there much privacy there? Would it be a nice spot to put a hammock or something to relax in? Maybe with pea gravel and a border of shade living plants.

Hi Lacie, have you thought of planting hostas? Hostas love shade, spread or can be spit to fill in areas. Good luck.

Hi Lacie, that looks like the ideal spot for Clivias, ferns or Begonias. I'm not sure what your soil conditions are like but you can plant them in containers. Perhaps with the ferns in the center, surrounded by fuchsia and hosta, and then then some shorter plants like impatiens or forget me not. The containers will also hide/disguise the fence.

Hi Lacie, your shaded area is a real opportunity to do some fun decorating and have a very private space. As othr's have suggested a quick privacy fence would be a roll of bamboo fencing zip-tyed to the current fence. It is usually about 6' tall so would provide great privacy. I'd suggest one or two comfortable outdoor chairs and a side table too to make a cool spot to enjoy this summer. Here's a link to some great ideas too which shows how gravel or pavers could keep that newly redone shed from having future rotting issues near the bottom. Hope you are inspired.

https://www.thespruce.com/shade-garden-ideas-4165708

I think planting a garden would be cool! For the ones that like shade, you could build a cover over the top. Don't over do it, you also might want to put a door on the shed to get through it all.

Hi Lacie, You could make and outdoor swing out of some old pallets https://www.hometalk.com/diy/grow/landscaping/diy-swinging-outdoor-bed-10845487, gravel to keep clean and provide good drainage, plant shade loving plants like Hostas, impatias, pansies, begonias and maybe a stone or cinder block wall and have a waterfall by the tree. https://www.hometalk.com/diy/outdoor/garden/q-how-to-finish-off-the-wall-part-of-a-waterfall-9086174 For privacy A bamboo fence would be nice.

A great area that could be such a pretty hideaway for you. Every one is suggesting Hostas. I agree. Easy upkeep too. :) Some flower pots to add color and height in the back corner. Can camouflage that back area of stuff and be easily moved when you need access. Add a privacy fence. Some gravel, paving stones, or even make an easy raised wooden deck would be a great sitting area for 2 chairs and a table. Add a pretty color to your shed. A sage green would be lovely. Add some further color with shade flowers like begonias in your window box. Enjoy!

What is the shed used for since it has an air conditioner? You could turn the space into a cool sitting and lounging area, and put a door where the window is now in the shed and turn the shed into a she shed. The air conditioner could be mounted to one side in a cutout. I would paint it a colorful color. And have some ferns and other shade plants. Either a pea gravel patio or pavers.