When you try to add, create or move a new file or folder into a Shared Drive and all of sudden get the error "File Limit Reached" and; it does not let you add a new item, here's what's happening:
A Shared Drive can contain a maximum of 400,000 items, including files, folders, and shortcuts. Note: This limit is based on item count, not storage use. We recommend that you keep shared drives well below the strict limit.
Shared Drives with too many files might be difficult to organise and search, or members ignore much of the content.
In this case, there are two recommendations:
1. Create a new Shared Drive and start using it.
2. Remove/Move any items that could be removed or moved to another Shared Drive.
To find out more visit: https://support.google.com/a/users/answer/7338880?hl=en