There is a strong interaction between the urban atmospheric canopy layer and the building energy balance. The urban atmospheric conditions affect the heat transfer through exterior walls, the long-wave heat transfer between the building surfaces and the surroundings, the short-wave solar heat gains, and the heat transport by ventilation. Considering also the internal heat gains and the heat capacity of the building structure, the energy demand for heating and cooling and the indoor thermal environment can be calculated based on the urban microclimatic conditions. According to the building energy concept, the energy demand results in an (anthropogenic) waste heat; this is directly transferred to the urban environment. Furthermore, the indoor temperature is re-coupled via the building envelope to the urban environment and affects indirectly the urban microclimate with a temporally lagged and damped temperature fluctuation. We developed a holistic building model for the combined calculation of indoor climate and energy demand based on an analytic solution of Fourier's equation and implemented this model into the PALM model. © 2021 - The authors.