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Hi everyone,
This issue was posted to the Service Health Dashboard (SHD) as incident SP72910 starting at Jul 21 2016 12:00AM (UTC). The user experience of this incident is: Site owners may be unable to create subsites using custom templates. Using default templates works as expected. Tenant administrators can view current information and updates on SHD at the link here
https://portal.office.com/admin/default.aspx#@/ServiceStatus/ServiceStatusHistory.aspx.
If you are experiencing a similar issue and do not see an SHD post, please let us know by sharing your tenant information via Private Message (PM) as this may indicate either a scoping issue or an independent problem.
I will be closing this thread for further posting in order for affected customers to easily identify the information here. You may subscribe to this thread or refer to SHD for the updated information. I will also post back here once the issue has been resolved on SHD.
Thanks,
Ryan