empty:=
space:= $(empty) $(empty)
path_escape = $(subst $(space),$(space),$(1))

TOP=$(call path_escape,$(abspath .))
TARGET=$(TOP)/foo

$(info TOP='$(TOP)')
$(info TARGET='$(TARGET)')

all: $(TARGET)

$(TARGET):
    touch '$(notdir $@)'

.PHONY: $(TARGET)

$ make
TOP='/tmp/space-test'
TARGET='/tmp/space-test/foo'
touch 'foo'

TOP='/tmp/space test'
TARGET='/tmp/space test/foo'
touch 'space foo'

s? = $(subst $(empty) ,?,$1)
?s = $(subst ?, ,$1)
notdirx = $(call ?s,$(notdir $(call s?,$1)))

$(TARGET):
    touch '$(call notdirx,$@)'