This is the problem with Multisite setup. Check your wp-config.php file. Right under define(‘MULTISITE’, true); you should have this:
define(‘SUBDOMAIN_INSTALL’, true);
If this is set to true you will be able to add new sites as subdomains. After you do this re-check in wp-admin, what extra lines you need to add to .htaccess and wp-config and you are ready to go.
Once you create a new subdomain website check if it works, if you get an error message don’t worry, you probably just need to add A record for your domain that ponts to your subdomain.