suddenly output is going to "out" directory

I'm running the latest version of IDEA (2017.2 #IC-172.3317.76). I have several gradle projects that I work on. Sometime recently, my projects started creating an "out" directory that was never there in the past. I cannot figure out why.

Building with gradlew from the command line, my build artifacts go into the "build" directory. In the past when I built or ran units tests within the IDE, the IDE would use the class files from the build directory.  But now when I build from within the IDE, the build artifacts are going into the "out" directory. The out directory has "production" and "test" subdirectories, and all the class files are contained somewhere in there. This is happening across multiple projects.

My coworkers do not have the same experience - so I am terrible confused. I have tried deleting all the IDEA settings I could find: 'rm -rf ~/.Idea*', and 'rm -rf <project>/.idea'.  Then re-open the project. Same thing.  I found the setting under File->Project Structure->Project Settings/Project->Project compiler output. This seems very much like the proper setting to change, but it was set to output to the "classes" subdirectory (yet another option!) and it has no effect when I change this setting.

I can't say for sure when exactly this started happening - sometime around the release of 2017.2.

Any ideas of what is causing this and how to fix it are much appreciated!