Explanation
Box 1: add an address space
Your IaaS virtual machines (VMs) and PaaS role instances in a virtual network automatically receive a private IP address from a range that you specify, based on the address space of the subnet they are connected to. We need to add the 192.168.1.0/24 address space.
Box 2: add a subnet
Address space is present but need to add subnet

References:
https://docs.microsoft.com/en-us/microsoft-365/solutions/cloud-architecture-models?view=o365-worldwide
https://docs.microsoft.com/en-us/azure/virtual-network/virtual-networks-static-private-ip-arm-pportal