From Optimisation to Closed-Loop Urban Automation: A Conceptual Framework for Spatial Intelligence and Physical AI in AI–IoT-Enabled Smart Cities

Artificial intelligence (AI) and the Internet of Things (IoT) are converging to create densely sensed, connected, and increasingly automated urban environments. However, research on AI–IoT integration remains dominated by optimisation-centric perspectives that under-specify spatial reasoning, physical actuation, and institutional accountability. This perspective addresses that gap by developing closed-loop urban automation as an analytical lens for understanding how AI–IoT systems move from urban sensing to consequential intervention. Drawing on a narrative, theory-driven synthesis of literature on Urban AI, IoT, Physical AI, spatial intelligence, digital twins, robotics, automation, and governance, the paper differentiates the framework from AIoT, cyber-physical systems, embodied AI, and optimisation-centric smart-city models. It identifies the distinctive conditions of urban automation, proposes six examinable propositions, and outlines implications for planning support, intelligent control, human oversight, and democratic legitimacy.