The “not enough space” error is usually caused at the start of where you’re building a road or where you are joining it to another.
I’ve noticed that map-generated roads are built in segments (hover the bulldozer over it to see) and if you try to make an intersection too close to where two segments join, it’ll give a ‘not enough space’ error. (similar errors if you try to make a railway crossing over or too close to a segment join in a road)…
It’s one of the quirks in this game which adds a lot of trial and error to road and railway building…