The building-resolving large-eddy simulation (LES) model uDALES, which is equipped with a two-way coupled surface energy balance (SEB) scheme, is used to simulate airflow and heat transfer in an urban environment over a diurnal cycle. The case study is based on a realistic masterplan, consisting of a set of buildings with underlying topography situated by the coast in a hot, arid climate. Motivated by how the built environment might influence thermal comfort in such conditions, the aim of this study is to understand the development of the urban microclimate in terms of the surface heat exchanges, atmospheric flow, and mean radiant temperature (MRT), in particular relative to that of the surrounding terrain. The bulk thermal response is investigated by aggregating SEB fluxes and quantifying the hysteresis of the heat storage, which shows that while the surface temperature is primarily driven by radiation, thermal inertia is also an important factor later in the daytime. The variation in the SEB across the environment is analysed in terms of the various surface types, and it is shown that the built environment exhibits a lower temperature than the surrounding terrain. Analysis of the pedestrian-level air temperatures indicates that that wind speed and direction is a crucial factor, with the highest temperatures observed in locations that do not necessarily have a high surface temperature or sensible heat flux. This discussion is supported by analysing the thermal plume resulting from the surface in terms of vertical profiles of wind speed, air temperature, and sensible heat flux.