Forest fell 2-0 down through early goals from Pavel Pogrebnyak and Kaspars Gorkss before clawing their way back into the game courtesy of Simon Cox and Darius Henderson.
But Jordan Obita struck the winner 16 minutes from time and despite the visitors' Chris Gunter seeing red for a second yellow card, Forest could not find an equaliser.
"It was a great game and it could have gone either way," said Davies.
"The first 45 minutes, we didn't compete, the second 45 was much more like us. The third goal was crucial and in the end we lost because we switched off in the centre of the park and it has cost us dear.
"I thought there only looked one team likely to win in the second half at 2-2. We had a couple of very good chances, but I thought in the second half we were much better, much more aggressive with the ball and without the ball.
"We again created a lot of chances and restricted them to few chances. Then we shot ourselves in the foot by not getting that third goal and then switching off, which was disappointing."