Whats occupying the most space on your phone?
Looks like iOS is deciding on this message based on the % storage left/available, So according to that only 16% left -lol
I would turn on the optimize storage option (as suggested in the message) if you have the space in your iCloud drive OR copy the photos (or large files) to your back up storage (external hard drive etc.)
Deleting unused apps would be another thing to look at esp. games if you have those. You have 237 apps
Turn on optimize music storage if you use apple music.