Being asked for an honest opinion

I would sit down and first of all write down your gut feelings, good and bad. This is a good starting point. Then read it through and write up a review. Then go through the review and pretend you are the author. How would you receive it? Go through your review again and soften it so that it is broad and balanced. i.e. I did not like the main character. I found him to be superficial and boring. Softer words. I thought the main character was interesting in (name few scenes where they appeared promising) but would have liked to have scene his character more developed as if he were someone I was meeting in real life. Amazon can be a good starting point. Some of the really good and really bad reviews can give you the 'softer' language which you could use. At the end of the day she spent days writing her creativity into it. so a gently yet guiding hand is really what she needs.

My publisher told me that authors have to develop a thick skin as, inevitably, there will be those who don't enjoy your books.

As a published author (not self published) who used to be asked to review unpublished authors’ (members of a large group) work, I would say that the vast majority needed cutting by a quarter, or even more. TBH many of the efforts were frankly dire, and I do not say that lightly. Overwriting/padding is IMO the most common fault.

In many cases I would struggle to find anything nice to say, but I always did, since I knew from my own experience how badly they were longing for someone to say it was wonderful and any publisher was going to grab it with both hands.

So I don’t envy you for feeling obliged to do this!
Suggesting a professional editor would be my advice, but I can almost guarantee that the author won’t like it.

I agree with Quercus. Do you really want to hurt your friend’s feelings? Find lots of good things to say and sandwich a little negative comment between them.

I think the difficult bit here is that it is costing her money to publish and you don't want her to waste more. Perhaps advise her to see how the 1st one goes before she spends more on the 2nd one. But as the 2 PPs above say be gentle with her. Compliment the good parts and offer just gentle advice about the length.
Try not to "gossip" with the other friends.

No writer ever wants a totally honest opinion, not ever, even if they say they do.
Do the 'sandwich' feedback: make positive comments about anything that even vaguely merits it, then one minor criticism, and finish on another positive note.

Personally, I could never do anything other than find all the positives to praise if a friend was trying to be a writer.
I'd want her to feel encouraged, it must be a wonderful vocation and I'd be so happy for her to have that outlet for her writing.
Market forces will decide if she is able to pursue it further, but I'd be behind her - so many famous authors were rejected by publishing houses at the start of their careers so I wouldn't feel qualified to critique anyway!

Suggest that it needs judicious editing? Of course she might have to pay for that.

Perhaps it would be even better with some judicious editing?

Many authors come up with a good idea for a story but there isn't enough to fill a book, so they pad it out with irrelevant details. Perhaps this is what she has done?
Perhaps she might be better writing short stories for a magazine, and you could suggest this?

I think a gentle amount of honesty is required. Perhaps if the basic premise of the book is good you could say so, but then go on to say you think it would have worked better if it was shorter, there was too much peripheral information to absorb type of thing. Just try to find something positive to start with, maybe her description of the locations, or the dialogue seemed very real, just something you can genuinely praise before enlarging on where you felt it could be better. I do think you need to be honest, but try to avoid being brutal.

I think it would be best to be honest. Pick out the parts of the book you liked but say you thought there was too much padding which detracted from the story.
Positive criticism will help her rather than let her make her second book long winded and boring.

Point out the good things first ( assuming there are some !) and then say you found it a little bit long ?