Prospect Hall was originally built by local entrepreneur John Kolle, a German immigrant. In 1890, he had built Tivoli Hall, a four-story concert hall in the part of South Brooklyn now known as Park Slope, for restaurateur Charles Feltman. The success of the Tivoli prompted Kolle to plan his own amusement hall. In May 1892, Kolle announced plans for Prospect Hall, which was intended to cater to the German societies and organizations of the area. It was to be located on Prospect Avenue, between Fifth and Sixth Avenues, a few blocks from Tivoli Hall. Prospect Hall was constructed at a cost of $130,000 ().
