So I did a little reading and invited the Vault Tec rep into my settlement. He's supposed to be an expert trader, but still, even fulfilling all the requirements for setting up level 3 shops, I can't build the thing. Level 2 is all I get. When I select level 3, I just get my mouse pointer without anything to be placed.

I dont even have him and I can build level 3 shops. I think it gets upgraded once you add them to it. It requires the local leader perk AND barter 2 or you're missing some materials like wood.

Yeah it gets upgraded to lvl 4 but you do need to build lvl 3 shop though(and recheck you are eather missing some of the resources or one of the perks, since it requiers more than just local leader)