Dear Umair Ahmed Shaikh
Good day!!
Apologies for the inconvenience caused and please don’t worry, let’s work together on your concern and move towards a resolution path.
I understand your concern and I have tested the behavior at my end where myself and other users in the tenant are able to create a new workspace in Microsoft Loop without any issue.
Since Microsoft Loop is enabled at the tenant level and Cloud policies are created but the new workspace is grayed out, I have checked the service health at the Microsoft end level where there is no related incident reported.
In this situation, I believe the problem should be further investigated by related development team via collecting HAR logs because there is no any related service incident reported at the Microsoft Service Health dashboard.
I do feel regret for not resolving the problem and redirecting you to the related development team but the fix to your concern can be find out through the HAR logs and suggest you raise a support ticket from the Office 365 admin center, where the related team will investigate the problem further by collecting the HAR logs.
Reference: Get support - Microsoft 365 admin | Microsoft Learn
Note: To create a support ticket, you need to have admin privileges and if you aren’t admin of your Office 365 organization, please contact the admin of creating a new ticket.
Appreciate your patience and understanding. Have a great day!!
Best Regards,
Sophia
