Yes, you still can have a tiled shower in a small bath. Only 40 square feet? That would be about 5 x 9? A half wall can be built with glass filling in up to the ceiling. This keeps an open feel, which is important is a small bath, plus brings more light into the shower.
Speaking of light, a moisture-rated light fixture can be installed over the shower, which really brightens up the space!
In a small bath, the toilet is typically installed between the end of the sink top and the shower. A narrow shelf can run along above the toilet, connecting from the countertop. This not only adds a bit of storage, but has a visual effect of elongating the countertop, and partially “hiding” the toilet.
Mirrors brighten a space and increase a feeling of space. Have a large mirror installed over the sink. Additional storage can be created by having your contractor build some shelves inside a wall. This is basically what an inset medicine cabinet does, but you don’t have to stop with the medicine cabinet!
Large floor tiles are a good look for small baths as well.