The word ‘space’ is not an adequate translation of the word ākāśh – it is more like “dimension”. There is an unfolding process of these dimensions by the chaitanya or our self-awareness. As the child grows it becomes aware of its cittākāśa, the psychological dimension and understands the limitation of its skin as the boundary between the ‘inside’ and the ‘outside’. The mind folds back and looks at the bhūtākāśa, the physical dimension that includes the elements in the external reality. The intellect discerns patterns, nomenclates them, learns linguistics and semiotic gestures thus building a repertoire of ‘higher’ awareness. Let us look at some later śhlökas explaining this (Y.V.III.97.16 & 17):-

sabāhya abhyanta atho yaḥ satta asatta avbodhakaḥ,
vyāpī samasta bhūtānāṁ cidākāśa sa ucyate (16)
sarva bhūthitaḥ shreṣṭho yaḥ kālkalnātmakaḥ,
yena admātataṁ sarvaṁ cittākāśaḥ sa ucyate (17)

 The infinite space of undivided consciousness (cid ākāśa) is that which exists in all inside and outside, as the pure witness of that which is in substance or only as a vaporous intent. The finite space of divided consciousness (citta ākāśa) is that which creates the divisions of time, which pervades all beings and which has spread out the other spheres in immense vacuity.