The virtual networks you peer must have non-overlapping IP address spaces. The exhibit indicates that VNet1 has an address space of 10.2.0.0/16, which is the same as VNet2, and thus overlaps. We need to change the address space for VNet1.
Reference:
https://docs.microsoft.com/en-us/azure/virtual-network/virtual-network-manage- peering#requirements-and-constraints
https://docs.microsoft.com/en-us/azure/virtual-network/virtual-networks-faq