The cloth hall was not built to be a theatre, even though the square it stands on is called Theaterplatz today. Cloth halls were the trading centre for clothiers who would fold, store, and then sell their cloths. By the time the building was completed in 1825, the number of master clothiers in Löbau had fallen from 14 to just 5. However, the introduction of new roads into the city led to a revival in trade with the markets and a subsequent economic boom. 

The costs for their construction were usually covered by the guilds themselves. Whether this was also the case in Löbau is unknown. The garrison stationed in Löbau also used the building for weapons training. The upper floor also hosted theatre performances and concerts. This is why the cloth hall is now located on Theaterplatz square. In 1936, it was converted into a soup kitchen and a warm space. Today it has stood vacant for many years.