good quistion. i guess it depends on the style of your fic, and where you're going with it.
i know in my fic, the two DO exist together. however, my world is a bit diferent , because the only pokemon that exist are the humans's dćmons (as in philip pullman's "His Dark Materials" series). this way, the pokemon are privliged and can speak, while the real life animals are as they are in real life.
but since your fic is not like mine, as most aren't, pokemon can be found in the wild. if you want real animals to exist as well, you could stress the point that pokemon are privliged beings that are more inteligant. i guess pokeballs were desined to only catch pokemon. while reall animals are less inteligent, demesticated only for farm purposes, and do not contain the correct dna to be captured by a pokeball.
you can expand on this as much as you want. technical stuff is always interesting to read.