Reid made a long-term commitment to the club on Thursday at a time when London rivals Tottenham and Arsenal were reported to be showing an interest in the defender.
And former QPR centre-back Nelsen - who, like Reid, was born in New Zealand - reckons the deal is good news for the player and the club.
"I think West Ham have had a fantastic year this season for Sam [Allardyce] and the ownership have got a new stadium to come and their fans are amazing," Nelsen told Sky Sports News.
"There is a huge history at the club and they want to go places and this is a real statement to sign an absolute quality defender, proven in the Premier League and he will there obviously for his career now. It's exciting for both parties.
"Obviously there is no hiding place in this league and it takes a bit of time. For Winston, what was great about him is that year they had in the Championship, I think he's learned his trade there and every year he has gone up and up. He's only 26 and he's still probably not as his prime.
"It's an absolutely fantastic signing, especially since I think in the market it's very hard to find proven quality centre-backs, for relatively low cost and in terms of not having to pay for a transfer and getting him on a six and-a-half-year deal."
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