I just upgraded a singular room, and then built another of the same room next to it, but I noticed they didn't merge. If I upgraded the new room, would they then become merged or do I have to merge rooms first before upgrading?

If you upgraded the other room to the same level as your upgraded version, they'll merge. The merging limit on the rooms is three, so after that, the next upgraded room will be it's own. Hope this helps.