Just upgraded to multisite – can't upoad images or plugins

I just updated to Multisite.

Now I want to install Pro Sites. When I try through WPMUDEV or manually I get a screen message saying

The uploaded file could not be moved to wp-content/uploads/2014/01.

I tried to add an image in a page editor and got the same thing.

Not sure if Permalinks is an issue or what is happening. Hope someone can help.