diff --git a/src/app/features/lobby/Lobby.tsx b/src/app/features/lobby/Lobby.tsx
index 069e925e..6851873f 100644
--- a/src/app/features/lobby/Lobby.tsx
+++ b/src/app/features/lobby/Lobby.tsx
@@ -162,6 +162,7 @@ export function Lobby() {
   const screenSize = useScreenSizeContext();
   const [onTop, setOnTop] = useState(true);
   const [closedCategories, setClosedCategories] = useAtom(useClosedLobbyCategoriesAtom());
+  const roomToParents = useAtomValue(roomToParentsAtom);
   const [sidebarItems] = useSidebarItems(
     useOrphanSpaces(mx, allRoomsAtom, useAtomValue(roomToParentsAtom))
   );
@@ -193,6 +194,36 @@ export function Lobby() {
     [mx]
   );
 
+  /**
+   * Recursively checks if a given parentId (or all its ancestors) is in a closed category.
+   *
+   * @param spaceId - The root space ID.
+   * @param parentId - The parent space ID to start the check from.
+   * @returns True if parentId or all ancestors is in a closed category.
+   */
+  const getInClosedCategories = useCallback(
+    (spaceId: string, parentId: string): boolean => {
+      if (closedCategories.has(makeLobbyCategoryId(spaceId, parentId))) {
+        return true;
+      }
+
+      const parentParentIds = roomToParents.get(parentId);
+      if (!parentParentIds || parentParentIds.size === 0) {
+        return false;
+      }
+
+      let anyOpen = false;
+      parentParentIds.forEach((id) => {
+        if (!getInClosedCategories(spaceId, id)) {
+          anyOpen = true;
+        }
+      });
+
+      return !anyOpen;
+    },
+    [closedCategories, roomToParents]
+  );
+
   const [draggingItem, setDraggingItem] = useState<HierarchyItem>();
   const hierarchy = useSpaceHierarchy(
     space.roomId,
@@ -200,9 +231,9 @@ export function Lobby() {
     getRoom,
     useCallback(
       (childId) =>
-        closedCategories.has(makeLobbyCategoryId(space.roomId, childId)) ||
+        getInClosedCategories(space.roomId, childId) ||
         (draggingItem ? 'space' in draggingItem : false),
-      [closedCategories, space.roomId, draggingItem]
+      [draggingItem, getInClosedCategories, space.roomId]
     )
   );
 
@@ -476,14 +507,20 @@ export function Lobby() {
                       const item = hierarchy[vItem.index];
                       if (!item) return null;
                       const nextSpaceId = hierarchy[vItem.index + 1]?.space.roomId;
-
                       const categoryId = makeLobbyCategoryId(space.roomId, item.space.roomId);
+                      const inClosedCategory = getInClosedCategories(
+                        space.roomId,
+                        item.space.roomId
+                      );
+
+                      const paddingLeft = `calc((${item.space.depth} - 1) * ${config.space.S200})`;
 
                       return (
                         <VirtualTile
                           virtualItem={vItem}
                           style={{
                             paddingTop: vItem.index === 0 ? 0 : config.space.S500,
+                            paddingLeft,
                           }}
                           ref={virtualizer.measureElement}
                           key={vItem.index}
@@ -498,8 +535,7 @@ export function Lobby() {
                             canEditSpaceChild={canEditSpaceChild}
                             categoryId={categoryId}
                             closed={
-                              closedCategories.has(categoryId) ||
-                              (draggingItem ? 'space' in draggingItem : false)
+                              inClosedCategory || (draggingItem ? 'space' in draggingItem : false)
                             }
                             handleClose={handleCategoryClick}
                             draggingItem={draggingItem}
diff --git a/src/app/features/lobby/SpaceItem.tsx b/src/app/features/lobby/SpaceItem.tsx
index 0a4d9de5..3a34f3aa 100644
--- a/src/app/features/lobby/SpaceItem.tsx
+++ b/src/app/features/lobby/SpaceItem.tsx
@@ -15,6 +15,9 @@ import {
   MenuItem,
   RectCords,
   config,
+  IconButton,
+  TooltipProvider,
+  Tooltip,
 } from 'folds';
 import FocusTrap from 'focus-trap-react';
 import classNames from 'classnames';
@@ -350,15 +353,42 @@ function AddSpaceButton({ item }: { item: HierarchyItem }) {
         </FocusTrap>
       }
     >
-      <Chip
-        variant="SurfaceVariant"
-        radii="Pill"
-        before={<Icon src={Icons.Plus} size="50" />}
-        onClick={handleAddSpace}
-        aria-pressed={!!cords}
-      >
-        <Text size="B300">Add Space</Text>
-      </Chip>
+      {item.parentId === undefined ? (
+        <Chip
+          variant="SurfaceVariant"
+          radii="Pill"
+          before={<Icon src={Icons.Plus} size="50" />}
+          onClick={handleAddSpace}
+          aria-pressed={!!cords}
+        >
+          <Text size="B300">Add Space</Text>
+        </Chip>
+      ) : (
+        <TooltipProvider
+          position="Bottom"
+          offset={4}
+          tooltip={
+            <Tooltip>
+              <Text>Add Space</Text>
+            </Tooltip>
+          }
+        >
+          {(triggerRef) => (
+            <IconButton
+              ref={triggerRef}
+              onClick={handleAddSpace}
+              aria-pressed={!!cords}
+              aria-label="Add Space"
+              variant="SurfaceVariant"
+              fill="None"
+              size="300"
+              radii="300"
+            >
+              <Icon size="50" src={Icons.SpacePlus} />
+            </IconButton>
+          )}
+        </TooltipProvider>
+      )}
     </PopOut>
   );
 }
@@ -473,7 +503,7 @@ export const SpaceItemCard = as<'div', SpaceItemCardProps>(
           {canEditChild && (
             <Box shrink="No" alignItems="Inherit" gap="200">
               <AddRoomButton item={item} />
-              {item.parentId === undefined && <AddSpaceButton item={item} />}
+              <AddSpaceButton item={item} />
             </Box>
           )}
         </Box>
diff --git a/src/app/pages/client/space/Space.tsx b/src/app/pages/client/space/Space.tsx
index a84c0e30..bb79dcac 100644
--- a/src/app/pages/client/space/Space.tsx
+++ b/src/app/pages/client/space/Space.tsx
@@ -314,11 +314,11 @@ export function Space() {
   );
 
   /**
-   * Recursively checks if a given parentId (and its ancestors) is in a closed category.
+   * Recursively checks if a given parentId (or all its ancestors) is in a closed category.
    *
    * @param spaceId - The root space ID.
    * @param parentId - The parent space ID to start the check from.
-   * @returns True if parentId or any ancestor is in a closed category.
+   * @returns True if parentId or all ancestors is in a closed category.
    */
   const getInClosedCategories = useCallback(
     (spaceId: string, parentId: string): boolean => {
@@ -331,14 +331,14 @@ export function Space() {
         return false;
       }
 
-      let closed = false;
+      let anyOpen = false;
       parentParentIds.forEach((id) => {
-        if (getInClosedCategories(spaceId, id)) {
-          closed = true;
+        if (!getInClosedCategories(spaceId, id)) {
+          anyOpen = true;
         }
       });
 
-      return closed;
+      return !anyOpen;
     },
     [closedCategories, roomToParents]
   );