I'm having an internal debate (turning external now), about how realistic fiction needs to be. You can establish almost anything as part of your world, if you're writing fantasy of science fiction. Artificial gravity, warp drive, demon-summoning equations, slower-than-bullets energy weapons, magic swords: you can do almost anything in spec-fic genres. But for fiction set in our world, in the here/now, the options are more limited. You can set your story in a fictional location and invent the geography of, say, Felport or Pickaxe, to suit your story's needs. But if you set your story in an existing well-known locale like London or New York City, you need to stick with the real. You can't have Grand Central Station in Queens, you can't have Trafalgar Square in Leeds, and you can't see Hoboken from the roof of the Flatiron building.
But how deep does this detail mine go? If I describe a police station in New York*, does there really need to be a police station that matches my description? Is this a small enough detail that I can fictionalize it? If I mention a bar or restaurant at a specific corner, does that restaurant need to exist? At a finer level of detail, if I describe the restaurant as being run by a fourth-generation descendant of the man who originally opened the restaurant in 1902, does this history need to be accurate? I've heard that Lawrence Block's Matthew Scudder novels are almost travelogues. When our hero walks around the corner from a specific apartment building and walks into a seedy bar, both the apartment building and seedy bar exist exactly as the author describes them; the seedy bar is probably owned by a person exactly as described in the book. Is this degree of realism, this extreme accuracy of locale, necessary?
I think I have a workable answer: if I'm setting the scene, I need to be accurate. Background details have to match reality. If a main character takes a cab from real point A to real point B, the scenery outside his window needs to be real. If my location is a real place, I need to respect the place and the people familiar with it. And I can't get any facts wrong.
But I can take much more liberty with anything that's central to my story. I can invent the coffee shop owned by my main character. I can invent a glitzy nightclub owned by the mafia don who ends up dead in chapter two, where half of the story takes place. I can create a townhouse that gets burned to the ground by the arsonist my detective is chasing, and avoid burning down any real buildings. I can't have London Bridge connect the wrong parts of London. But I can have my main character be the main architect of a new bridge linking Dover and Calais, the new (completely fictional) 25-mile span linking France and England, which is threatened by terrorists.
I'm still a bit fuzzy about the precise division between things you can invent for story reasons, and real-world details that writers need to report accurately. But for now it's less of an issue; The Novel is fantasy, so I can make up pretty much anything I want to make the story flow....
* As an outsider, it seems that 95% of the usage of "New York" means "New York City," and 90% of that usage refers specifically to Manhattan.