Every time you finish the game with a new character, you will be able to upgrade the town (for all characters).
There are 3 upgrades for the Stores/Alley which increase the rarity of equipment and items offered and the Alley will increase the quality of equipment and items provided.
There are 3 upgrades for the Storage, which each will increase the Bank by 25, Inventory by 15, Pet storage by 20, and Quests by 3. Additionally, at level 3, the Seeker allows you to select the enchantment that you will receive.