Cap space is the gap between a team's committed salary and the salary cap: the money it can offer free agents or absorb in trades without using an exception.
In HoopSim cap space is the cap minus your total committed money, which includes cap holds and dead money, so a qualifying offer you have issued eats into it. You spend it on free-agent bids (choose "cap space" as the way you are paying), and every bid is checked against it when you place it and again when the player signs; if several of your offers land at once and the room runs out, the later ones fail. In a trade a team under the cap can take back its cap room or the over-the-cap allowance, whichever is more. Once you are over the cap, exceptions and Bird rights take over.
Rulebook: Payroll & holds. Related: cap hold, salary cap.