This is because currently loot is only spawned on server startup. I'm unsure of how the loot generation function actually works tho, and I know spawning too much loot can actually make the server run out of object references, which has hilarious effects like players spawning invisible etc.

You also need to check there are no players near where you are spawning/recycling loot and it's all made a lot harder by the fact that large buildings like the apartment buildings in cherno obviously might need to be recycled more often than say, military barracks.