Why weren't the swedish liberal party able to occupy that political space ?
I'm not an expert in Swedish politics, so take the following with a grain of salt.
The Liberals have always been the most pro-Western and pro-NATO party in Sweden and a significant part of their leadership, membership and voter based has been rather security-oriented, sometimes even by profession. Anyways during the 2000s as far as I know the dominant wing of the party cultivated a (by Swedish standards) law and order image which made the party less attractive to the most socially liberal potential members and voters.
The Centre Party on the other hand was a party that had a slowly shrinking agrarian base and was looking for new issues. During the 2000s Maud Olofsson moved the party into the aforementioned direction and a self-reinforcing process started in which newly attracted members and voters moved the party further into that direction.
That's how I would explain it. Anyone please correct me if I'm wrong (even partially).