The 25-year-old Scot was beaten 4-6 6-4 6-4 by defending champion Joachim Gerard of Belgium at the Olympic Park.
However, the 2016 Rio Paralympic champion still finishes the year as men's singles world number one.
"That was a really disappointing performance. My serve and return let me down a bit," Reid told BBC Sport.
"They were my two biggest strengths over the week and they are important on this surface and were the two things I did the worst today.
"When you can't get a good start to the rally then it is difficult to get into this match, especially when Jo is serving so well.
"I came out yesterday quite nervous because I wanted the number one spot and got that. Today felt like an anti-climax but it gives me something to aim for next year."
The Scot trailed 2-4 in the opening set but won the next four games in a row to go one set up.
Neither player was able to exert their authority in the second set with seven breaks of serve in a row, but Gerard managed to serve out the set at 5-4 to level the match.
Gerard started the third set strongly, breaking Reid twice to go 4-0 ahead and although the Scot fought back to trail 5-4, Gerard again held his nerve to seal the win.
"I'm so happy to retain my title," the 28-year-old Belgian said. "It's been a good year for me and hopefully next year I can do like Gordon has done and become world number one."
