It is probably because the subdomain has previously been used and the site is yet to be removed from the platform. However, Squarespace Customer Care should always be your first stop for questions about your site or account. You can reach out to them here.
Also, bear in mind that this domain is only used by you to administer your site. You can purchase any available domain name and connect this to your site for public visitors to use. See: https://www.squarespace.com/domain-name-search