What happens if a department runs out of space?
There is no "usually". There isn't a worldwide academic rulebook that states what happens when a department runs out of space. This is extremely dependent on the university, the department, who runs each, the current power balance between the different departments and the university, the university's budget, the culture of the research field and the country... Academia isn't different from the rest of the world, how would you even start to answer a question as vague as "what happens when a company's department runs out of space"?!