How to make room in storage?

Unpair your Apple Watch via the Watch app on your iPhone.

Then Re-pair your Apple Watch,this deletes temporary and corrupted files

and also clears the system cache freeing up a surprisingly large amount of storage space.And without any loss of data.

I’ve had the same problem. Try shutting off you watch. Hold the bottom button & slide it off. Sometimes this frees up enough memory. If that doesn’t work, take a look in the watch app on your phone (general then usage) to see what apps are using the most memory- you can tweak some of them to use less. Last resort is to do a reset of your watch. Hope this helps you

It seems like the real issue is either with watchOS or iCloud storing too much cache on the Watch — particularly on Series 3 Watches. The only remedies given are variants of ‘restart it’ and ‘wipe it.’ Since the used storage on the Watch accretes over time, the issue will inevitably happen again — probably at the next update.

Apple seems to be aware of this issue. They apparently have decided that the Series 3 Watch is deprioritized for any kind of real fix, and are just telling people to wipe and start from scratch every time it happens. Or, they’re hoping that people will just shell out hundreds more dollars for a newer Watch. That’s unacceptable for a premium brand like Apple. If you say you support Series 3 Watches, actually do it.

We are NOT apple here,we are volunteer users just like you trying to help people,if you want to have a go at somebody then go to the horses mouth here;

Feedback - Apple Watch - Apple