Apple Watch Series 3 update from 7.2

Try this;

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

Then Re-pair your Apple Watch,this frees up a surprisingly large amount of storage space.And without any loss of your data.

Or this;

If you don’t have enough space to update your Apple Watch – Apple Support

We followed these steps and the update continues to fail. Info about the watch says there are 3.5 GB available space.

Try this;