Advancements in uncrewed aircrafts and communications technologies have led to a wave of interest and investment in unmanned aircraft systems (UASs) and urban air mobility (UAM) vehicles over the past decade. To support this emerging aviation application, concepts for UAS/UAM traffic management (UTM) systems have been explored. Accurately characterizing and predicting the microscale weather conditions, winds in particular, will be critical to safe and efficient operations of the small UASs/UAM aircrafts within the UTM. This study implements a reduced order data assimilation approach to reduce discrepancies between the predicted urban wind speed with computational fluid dynamics (CFD) Reynolds-averaged Navier Stokes (RANS) model with real-world, limited and sparse observations. The developed data assimilation system is UrbanDA. These observations are simulated using a large eddy simulation (LES). The data assimilation approach is based on the time-independent variational framework and uses space reduction to reduce the memory cost of the process. This approach leads to error reduction throughout the simulated domain and the reconstructed field is different than the initial guess by ingesting wind speeds at sensor locations and hence taking into account flow unsteadiness in a time when only the mean flow quantities are resolved. Different locations where wind sensors can be installed are discussed in terms of their impact on the resulting wind field. It is shown that near-wall locations, near turbulence generation areas with high wind speeds have the highest impact. Approximating the model error with its principal mode provides a better agreement with the truth and the hazardous areas for UAS navigation increases by more than 10% as wind hazards resulting from buildings wakes are better simulated through this process.