Lees returned to the starting line-up after recovering from a foot injury but was powerless to stop his former club from picking up maximum points at Hillsborough.
The Owls were architects of their own downfall, failing to convert a number of opportunities in the first half.
Their poor finishing came back to haunt them after the break as Marcus Antonsson and Chris Wood registered to ensure Leeds claimed the local bragging rights.
Lees said: “It hurts because it is a derby and no-one wants to lose the game. We aren’t going to win or lose the league on the result but it was not good enough.
“To be fair, we had some good chances in the first half and could have been two or three up and then Leeds played better in second and when we gave them a chance to score, they put it away and that’s the story of the game really. It we scored first, we might have run away with it.”
The 25-year-old accepts the Owls have under-performed in their last two outings.
“We have let ourselves down,” he told The Star. “We have turned two good results against (Villa and Norwich) into a poor start and we have got it all to do.
“We can’t afford to not play at our maximum level or we will get found out like we did against Leeds. We were a couple of per cent off it and we got a deserved beating.”
Lees added: “We have to make sure our team, shape and pattern of play is nailed down. We have a few new players but can’t use that as an excuse as the main part of the group has been together for almost a year now.”