This issue could be due to cached mode being enabled inside Outlook.
Cached mode essentially caches (stores) some of your Outlook data on the local pc for offline use as an .ost file. An .ost file is an offline outlook data file used by Microsoft Outlook for cached mailboxes to work offline. Depending on how big your mailbox is this can take up a lot of storage space. (An .ost file has a limit of 50GB which is also the limit of a standard outlook mailbox.)
To check if cached mode is enabled you would navigate to the dropdown that says account settings, then click account settings again the you would double click on your mailbox then this will bring up a popup which will say cached exchange mode with a tick box next to it.
Usually this would be okay but some Microsoft 365 licenses increase the size limit of a mailbox to 100GB. Which means if you’re in cached mode and you have a license that increases the maximum mailbox size, Outlook will try to make the .ost file larger than it physically can be.
Therefore, the only way to resolve this issue is to either turn off cached mode completely or turn down the amount off time “mail to keep offline” is set to.