Harry was offered apartments in Buckingham Palace and St James' palace but turned them down - preferring to stay at Soho House or hotels - which you would think would be less secure than apartments inside the royal security cordon.
The problem is that Meghan appears to see house size as an indicator of her VIP status - Nottingham cottage was an insulting "frat house", 5 bed Frogmore cottage was much less than she thought she deserved ... she wanted the big Montecito McMansion.
I guess the dismantling of Frogmore indicates the finality of their estrangement. I think Harry always assumed he could just just return whenever he wanted but the fact the house is being divided into smaller units, and the Soho House inspired decor is being ripped out is maybe driving home his reduced status.
However, I'm not sure what they expected. Did they think the house would be kept unchanged indefinitely as a museum to them? They moved in in 2019 and only lived there for a few months before they quit the royal family. They spent a few days there in 2022 and Eugenie rented it for a few weeks - but otherwise it has stood empty for 6 years. With the current scrutiny of the Crown Estates it just wasn't viable to keep it empty.