Here’s how airlines decide to make confirmable upgrade space available. They project how many first class seats they may sell in the cabin, and leave a buffer.
Seats that they know won’t be sold for cash might be given away as upgrades – but they also want to make sure that frequent flyers don’t confirm upgrades instead of paying cash so they’ll limit upgrades even still (often to when first class seats are available inexpensively – then the revenue tradeoff isn’t great, and the temptation not to pay cash is small).