Graphics editors often suffer from a large number of tool palettes that compete with valuable document space. To address this problem and to bring back physical affordances similar to a painter’s palette, we propose to augment a digital tabletop with spatially tracked handheld displays. These displays are dynamically updated depending on their spatial location. We introduce the concept of spatial Work Zones that take up distinct 3D regions above the table surface and serve as physical containers for digital content that is organized as stacks of horizontal layers. Spatial Work Zones are represented either by physical objects or on-screen on the tabletop. Associated layers can be explored fluently by entering a spatial Work Zone with a handheld display. This provides quick access and seamless changes between tools and parts of the document that are instantly functional, i.e., ready to be used by a digital pen. We discuss several use cases illustrating our techniques and setting them into context with previous systems. Early user feedback indicates that combining dynamic GUI functionality with the physicality of spatially tracked handheld displays is promising and can be generalized beyond graphics editing.