Bayesian system identification is increasingly used in Structural Health Monitoring (SHM) to infer unobservable parameters of a structure from sensor data. The use of spatially dense measurements, such as those from distributed fibre optic sensors, can further enhance the results of Bayesian system identification due to the large volume of data. However, this combination faces two major challenges: the computational cost of inference and the correlation structure of closely spaced data points. To overcome these difficulties, we propose a methodology that combines the recently-developed Variational Bayes Monte Carlo (VBMC) method with Gaussian process modelling of model discrepancy, and extend VBMC to enable posterior predictive calculations without additional model evaluations. We demonstrate the effectiveness of the proposed methodology on a reinforced concrete slab bridge instrumented with distributed fibre optic strain sensors and analysed using a finite element model. The main outcome is that VBMC requires fewer than 200 finite element model evaluations while producing accurate estimates, whereas a conventional MCMC method requires thousands. The application of the proposed framework provides two additional novel insights: accounting for spatial correlations improves model performance and higher measurement resolution leads to more precise parameter estimates, though with limited impact on predictive accuracy. This study advances the practical implementation of Bayesian system identification in SHM by providing both the computational efficiency and statistical framework needed for modern sensing technologies.