I think this is a bug. My game is in patch 3.0.1.
Detailed steps to reproduce the bug is given below.
Go to luminous bathhouse boiler room and reach the wall that can be broken. Disable the alarm successfully and then break the wall with chisel and hammer. Next, reach Arkemyr's manor using grappling hook from the dark cupboard upper floor window. Go to Arkemyr's room and steal his robes. Wear the robe and the ironclad guard outside still becomes hostile.
Now, till patch 2.1, this quest