If you look at the gray area to the left of the blank space while in the subreport, what section is identified? There are many reasons you could be seeing this. In design mode, make sure you don't have unused white space by tightening up the sections and suppressing unused sections. In the section expert, format sections to "suppress blank section" and also check to see if you "new page after" checked on some section. If you do, go into the formula area for that and add:
not onlastrecord
Also check in the main report (design mode) to see whether you have unused white space in the section containing the sub.
-LB