Standalone. The Sinking City 2 is a numbered sequel in the same Lovecraftian 1920s universe, not a direct continuation of Charles Reed's Oakmont campaign. You do not need to play the first game. New protagonist, new city, new plot. Reed's story ended in the first game on purpose with multiple moral endings and no single canon.

1What Is Actually New

Protagonist
Calvin Rafferty, occult adventurer. Not Charles Reed.
City
Flooded Arkham, not Oakmont. More contained and hand-crafted than Oakmont's larger, emptier open world.
Plot
A Dreamlands ritual goes wrong. Calvin's partner Faye is left in a supernatural coma. He stays in the dying city to get her back.
Genre shift
Survival horror first (scarce ammo, inventory, combat, shortcuts), optional investigation second. People who loved Reed's open-world deduction are the ones most surprised.
Community comparison: "Resident Evil 2 remake energy in a fedora," not "Sinking City 1 but wetter." Same decade, same mythos (cults, Dreamlands, Miskatonic, floods), different city, different lead, different tone.

2How to Decide and Start Without Getting Tripped Up

3Play 1 First or Jump to 2?

You want...Do this
A self-contained horror story you can start tonightJump straight into The Sinking City 2.
Maximum easter eggs and "I know that name" momentsPlay or recap The Sinking City first. Reed gets mentioned, cities share a map. Nothing story-critical.
The original's open-world deductionPlay 1 for that. 2 will feel like a different genre.
Best current version of the seriesMost recent player posts call 2 the tighter, better-playing game even if they miss the investigation.

Common Mistakes

Bottom line: start The Sinking City 2 as a standalone Arkham survival-horror story about Calvin and Faye. Oakmont and Charles Reed are background flavor for people who already lived there.