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Marla and Aaron are young and hip, and just about to start a family. To make room for their new arrival, the couple moved out of their trendy urban loft and into a funky 1950s home in the suburbs. Most of the house was decorated in a minimalist, mid-century modern design, but the basement was another story.

It was retro, but in a sad and tired sort of way, complete with wood panelling, a dingy fireplace, flattened shag carpet and slouchy, old furniture.

The couple just adores music and wanted to use their basement as a rehearsal space for Aaron's folk-rock band - and a place in which they could relax, entertain guests and work.

There was just one problem: With a baby on the way, funds were tight and their redesign plans would have to adhere to a strict budget. So I decided to keep the retro vibe of the place going (sans lava lamp and wave machine), but update it in a way that would rock Marla and Aaron's world and not break the bank.

I got rid of everything in the room and started this redesign from scratch. I pulled down the wood panelling and put up new walls in a crisp shade of birch white.

I uprooted the shag rug and put down a durable, low-pile, rich caramel-coloured carpet. I also carved out a new doorway to lead into this soon-to-be gorgeous room.

I then divided up the space into different functional zones: a section for band jamming, a place for "chilling" by the fireplace, and a little nook for office work.

I made the fireplace the focal point in the relaxation area. I covered up the existing brick and built a fireplace elevation in one continuous slab of cut stone veneer from floor to ceiling. I then installed cabinetry on either side of the fireplace for CD (and toy) storage. Because this area was all about relaxation, I installed a variety of seating in a colour scheme of earthy browns, dreamy oranges and rock-and-roll charcoals. All of these colours relate to the tones in the fireplace.

Next, I got busy on the rehearsal space, where I installed a few sofas, some tables, white retro swivel chairs and some rustic sitting stools for the band.

I then gave the whole area a twist by putting a vinyl-backed photographic mural of a birch tree forest along one entire wall. In the old space, this mural would have looked tacky, but blended with the new wood-toned furniture, updates and finishes, it looks right at home - and even adds a bit of depth to the room.

Between the lounge and jam areas, I created a small office space with a mobile desk unit and some additional storage.

To lighten the space, I put up recessed lighting, including some lights above the fireplace to make the whole area pop. I then added a bit of whimsy with a few new funky retro light fixtures.

After adding in a few final accents - coloured throw pillows, cool vases and stylish artwork - Marla and Aaron's hip and happening lounge space was done. By blending the best of the 1950s, '60s and '70s, with some modern (but inexpensive) touches, this basement is now the perfect space for folksy jamming - or baby lullabies. How divine!

Interior design consultant Candice Olson is the host of Divine Design on the W Network. You can watch the transformation of this space on Saturday or Sunday. For more information, go to www.wnetwork.com/divinedesign or www.divinedesign.tv

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