The building sector plays a crucial role in the ongoing energy transition due to its significant share of global energy consumption and carbon dioxide emissions, especially when combined with the estimation that 70% of the world's population will be living in urban areas by 2050. District heating and cooling (DHC) systems have been widely recognized among the viable options as an effective solution for achieving the challenging mid-century targets. In the context of decarbonizing and electrifying the thermal energy requirements in urban areas, this thesis provides a methodology for optimally designing district energy systems (DES). The thermal demand of existing non-residential buildings was first estimated through the development and calibration of grey-box models. Despite challenges and limitations of relying on measured data, doing so allows the definition of optimal operating temperatures for a future energy system. Comparing models calibrated with measurements obtained over different time resolutions revealed the poor performance of heating signature approaches when reconstructing hourly profiles and the potential of the clustering process of balancing modelling errors at the annual level. A flexible mixed-integer linear programming superstructure was then developed to systematically investigate optimal DHC configurations, including the sizing and operation of conversion technologies, as well as the type, layout, diameter, and operating temperatures of the thermal network. Comparing different solutions under economic, environmental and exergy-based key-performance indicators, demonstrated the potential of the anergy network to reduce investment costs without deteriorating systems performance. Additionally, a sensitivity analysis revealed that hybrid configurations with an intermediate degree of decentralization are the most robust to cost uncertainties. Finally, given that 90% of the existing DES worldwide are based on fossil fuels, the developed methods were further enhanced to address the optimal retrofit and expansion of existing systems. Particular focus was given to network expansion, replacing fossil-based technologies with more sustainable heat pumps, and synergies between heating and cooling requirements. Applying the developed methods to a case study further demonstrated both the sustainability and improved economics of the multi-temperature level configuration compared with the fossil-based, high temperature option. The work presented was carried out in collaboration with an international airport to assist their transition towards a fossil-free energy system based on a low temperature network.