Steffen is this season on-loan with Middlesbrough after spending the previous campaign at City as understudy to outright No1 Ederson.
And with Ederson firmly established at City, Friedel says Steffen needs to seek a new permanent home - particularly that he's now 27 years of age.
Speaking to Tribalfootball.com on behalf of OLBG, Friedel said: "Yes, he should look for that move.
"I think if you asked him, I don't know if he could say it publicly, but he would agree.
"Ederson is one of the best goalkeepers globally and unless there's a long-term injury then nobody is going to play ahead of him at the moment.
"Manchester City are an incredible club with a great coach and great players, but at Zack's age he needs consistent football.
"I think it was smart to go out on loan this season right before a World Cup."
Citing his own time at Liverpool, Friedel says Steffen needs to seek a club where he knows he will be playing regularly.
He added: "But I think he should look elsewhere, it's not easy to leave but I left Liverpool.
"It's not easy to leave these huge clubs, but if you're not playing you've got to go play somewhere else."