How to fix Error: Error creating Virtual Network: AddressSpaceOverlap in Terraform

Check which VNets currently exist in your Azure subscription and review their address spaces. Use the Azure portal or run:

az network vnet list --output table

Look for any VNet with an address space that overlaps with the one you are trying to create. For example:
- Existing VNet: 10.0.0.0/16
- Your new VNet: 10.0.5.0/24 (overlaps—falls within 10.0.0.0/16)

Ensure your azurerm_virtual_network resource has a non-overlapping address_space:

resource "azurerm_virtual_network" "example" {
  name                = "example-vnet"
  resource_group_name = azurerm_resource_group.example.name
  location            = azurerm_resource_group.example.location
  address_space       = ["10.1.0.0/16"]  # Must not overlap with existing VNets
}

Common private IP ranges follow RFC 1918:
- 10.0.0.0/8 (large networks)
- 172.16.0.0/12 (medium networks)
- 192.168.0.0/16 (small networks)

If you are peering VNets, confirm that all peered VNets have non-overlapping address spaces. View existing peerings:

az network vnet peering list --resource-group <group-name> --vnet-name <vnet-name>

You cannot peer two VNets with overlapping address ranges. If necessary, update the address space of one of the VNets or use VPN Gateway with Network Address Translation (NAT) instead.

Plan your IP address space carefully. Create a spreadsheet or use an IPAM tool to document all VNets and their address ranges:

| VNet Name | Address Space | Region |
|-----------|---------------|--------|
| prod-vnet | 10.0.0.0/16 | eastus |
| dev-vnet | 10.1.0.0/16 | eastus |
| test-vnet | 10.2.0.0/16 | westus |

Update your Terraform configuration to use the new address space:

address_space = ["10.3.0.0/16"]

Once you have a non-overlapping address space, run:

terraform plan
terraform apply

The terraform plan output should show the new VNet being created without conflicts. If you still see the AddressSpaceOverlap error, double-check that no other subscription, region, or peered VNet uses the address space you selected.

If you modified an existing VNet's address space, update or recreate any peering connections:

az network vnet peering delete --name <peering-name> --resource-group <group-name> --vnet-name <vnet-name>
az network vnet peering create --name <new-peering> --resource-group <group-name> --vnet-name <vnet-name> --remote-vnet <remote-vnet-id> --allow-vnet-access

Verify the peering is active and both VNets have non-overlapping address spaces.