A challenging problem in structural damage detection based on vibration data is the requirement of a large number of sensors and the numerical difficulty in obtaining reasonably accurate results when the system is large. To address this issue, the substructure identification approach may be used. Due to practical limitations, the response data are not available at all degrees of freedom of the structure and the external excitations may not be measured (or available). In this paper, an adaptive damage tracking technique, referred to as the sequential nonlinear least-square estimation with unknown inputs and unknown outputs (SNLSE-UI-UO) and the sub-structure approach are used to identify damages at critical locations (hot spots) of the complex structure. In our approach, only a limited number of response data are needed and the external excitations may not be measured, thus significantly reducing the number of sensors required and the corresponding computational efforts. The accuracy of the proposed approach is illustrated using a long-span truss with finite-element formulation and an 8-story nonlinear base-isolated building. Simulation results demonstrate that the proposed approach is capable of tracking the local structural damages without the global information of the entire structure, and it is suitable for local structural health monitoring.