Make a box out of 3/4" ply, whatever size you want, fasten it to the studs. You might want to make the top, bottom edge, sides 1-1/2 or more to improve looks, especially if you want to extend it into the room. Then cover everything in cement board, tape with Kerdi tape, then mud and tile
I watched on YouTube about using a waterproofing membrane.Or build a box out of 2x3s that fits inside that and put backer on the back of it before you put it in and you will have a 1/2" gap between the niche and the other drywall.
Just checking, it looked like you were working off the floor. :biggrin2:Yes. But not up to the height of that shelf.