Cannot meet room requirements
I will consider the image you posted on question comments As part of the question.
The problem is: you have to draw a 5x5 square to make the holding cell. You only drew 1x1.
I had this problem also, I thought the game would fill the room up to the walls if I mark a single square as a room. It was an expected behaviour that was not implemented.
You have to use the room tool and drag a square 5x5 to make the room. The objects can be placed before or after that.
Issues with running Prison Architect through Parallels (MacOSX). Installed on bootcamp, problem no longer exists.