As downtown Traverse City continues to boast record low retail vacancy rates, some business owners are literally looking up and down to find ways to expand their retail and restaurant spaces.

According to a recent Downtown Development Authority (DDA) report by Executive Director Rob Bacigalupi, vacancy rates have hovered between 1 and 3.4 percent downtown over the last year – significantly below the national average of 6.5 percent. The high occupancy levels are a good reflection of the district's economic stability, but “with all of the demand for space downtown, merchants have had to get creative in where they locate their operations,” says Bacigalupi.

At clothing boutique Ella's, owner Wendy Buhr recently expanded into the building's basement after a previous tenant vacated the premises. The Stockroom, as the new space is called, now houses vintage and consignment items and acts as an off-shoot of the store's main operation upstairs. “The idea is we're inviting you into our private stockroom,” says Office Manager Bonny Hall. “It's a funkier vibe...it's kind of hidden.” The store can be accessed through a door off the northern alley, or upstairs through Ella's.

Down the street, Corner Loft owner Marie Schwartz has also gone vertical for an expansion – only in this instance, upward.

Schwartz recently converted the former TV 29&8 offices into an upscale event space offering sweeping views of Grand Traverse Bay. “Our sons had a couple of parties up there while we were trying to figure out what to do with that floor, and saw firsthand what a great party venue it was,” she shares in the DDA report, noting that downtown building owners considering vertical expansion should “take full advantage of the views" by utilizing the "largest and lowest windows available.”

While businesses not at street level “run the risk of having lower foot traffic,” according to Bacigalupi, their hidden nature can be part of their charm. Beauty boutique Venus has thrived in its below-ground location on Front Street since opening in 2000, and the ambience of speakeasy-themed Low Bar – tucked away in a basement next to 7 Monks on Union Street – is enhanced by its secretive locale.

"We didn't know at first how it'd be received, not being visible," says Low Bar Co-Owner Matt Cozzens. "But it's been really great – our traffic flow is growing every month. Our main concern was, we didn't want to create just another bar or put another bar in a standard location. We're appreciative people have been responding to it."

While not ideal for every type of business – retail in particular relies strongly on a visual presence with shoppers – in such a crowded market, owners must often make the most of whatever space they can find. “When you can't expand laterally, expansion vertically just makes sense,” says Bacigalupi. City Planning Director Russ Soyring notes companies like Lilies of the Alley and new eatery Harvest are even thriving in the alley between Cass and Union streets, away from the main strip – a “sign that we have a very strong market downtown,” he says.

Restaurant owners, meanwhile, will be able to take advantage of a recently enacted sidewalk cafe ordinance that will allow them to expand their dining space onto public sidewalks beginning in 2015. Though the ordinance comes with strict space and clean-up stipulations, it affords eateries an opportunity to add valuable extra seating during the profitable summer season that otherwise couldn't exist.

With both restaurant and retail footage projected to remain at a premium for the foreseeable future, Soyring says relief could eventually come in the form of consolidating parking and converting surface lots – which now form “a substantial part of downtown” – into multi-level buildings. Numerous Front Street building owners also have residential apartments on their upper levels, which could be converted to commercial space if demand warranted it. Growth will also likely expand outward from downtown – east and west on Front Street, as well as on Eighth Street and south on Cass and Union.

In the meantime, the city planning director says he “applauds” business owners who are finding creative ways to utilize space downtown. “The better use of existing space downtown and in multi-level buildings...is the antithesis of urban sprawl,” says Soyring. “It helps move us toward a more compact, walkable community.”