The south Antrim side took the lead at Dixon Park five minutes before the break when Tom Mathieson found the net.
However, Newry, who came into the match sitting top of the Lough 41 NIFL Championship table, equalised through James Teelan on 53 minutes.
Darren Mullen’s charges then took the lead three minutes later when Darren King got on the end of a Daniel Hughes cross.
Declan Carville got a brace to increase the visitors’ lead, finding the net on 69 minutes and 76 minutes.
Daniel Hughes capped off a strong display for the Co Down side with a goal on 87 minutes with the result remaining 5-1 at the final whistle.
The Comrades, who started the season strongly and narrowly missed out on the chance to go top at the end of October, have struggled for form over recent months in the league.
The poor displays have seen them slide down the standings, picking up 21 points from 24 games.
The Newry City tie was the final match of the regular fixture list before the split, with the Comrades finishing in ninth place.
They will now take on the five other bottom half teams (Ards, Dundela, Institute, Knockbreda and Queen’s University), hoping to keep some daylight between themselves and the relegation/promotion play-off spot.
Speaking to Ballyclare’s media officer Zoe Tisdale after the weekend’s clash, Small, who took charge at the Comrades on March 10, stated: “The gap between us and them really showed today in terms of them getting over the line and winning the league and us being sure that we’re in our own mini league at the tail end of the table. I think that gap showed today, especially in the second half.
“In the first half, structurally we did really well and I was delighted by an uneventful first half because it meant we kept their chances to a minimum, I think they had one chance in the whole first half.
“I’ve been in the game long enough to know that a team such as them would have to change their shape and be a bit more proactive and they did.
“In the second half, they showed why they are where they are and we showed why we are where we are. It was one to forget, that’s for sure.”
Commenting on the post-split games, which start with an away trip for the Comrades to the Brandywell to face Institute on Saturday, April 9, the former Carrick Rangers boss explained: “We need to try and finish top of that bottom part of the league.
“It’s going to take all of us to be tight as a group and show great desire and work ethic and all those things that we’ve seen from Newry in the second half today.
“I’m only started working with the boys, so we’ll get in on Tuesday night again and try and get that out of our system to try and get back to that hard work and prepare for the next game.”