How do I make this look much better? Do I set it up in Blender or do I need to work on it in three.js?
You mush add HDR or Roomlight to illuminate the scene
I think most people find it easier to do the lighting, shadows, and other effects in three.js. They’re not trivial to transfer from Blender to three.js. Baked ambient occlusion (AO) might be the exception that is easier done in Blender.
Personally I might start with an IBL (just another word for HDR lighting or THREE.RoomEnvironment as @Umbawa_Sarosong suggests) and some ambient occlusion here.
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This is especially true if you want to have moving light sources and shadows.
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Thanks! I will give this a go and see how it turns out!
You can set an environment map to get richer lighting detail.
Also you can ensure that your materials are proper PBR materials with reasonable roughness/metalness settings.
You may want to add a directional light to simulate incoming sunlight from windows, and/or attach a point light or spotlight to one of the primary light sources in the scene, like an overhead light, or similar.
From there, there are a few ways you can go. Indoor scenes can benefit from post processing effects like ambient occlusion:
and sometimes bloom: