When installing from a local archive, the --build-dir option is ignored and instead a temporary directory is always used.

As far as I can tell this is decided in req.py, in InstallRequirement.build_location(), where the value supplied by --build-dir is only taken into consideration if self.req is not None. I'm not really sure what self.req is meant to represent so I can't submit a patch at this time (or decide if this is expected behaviour in some way).

Thanks for your feedback.

UPDATE: #1831 fixed this for wheel archives. the problem remains for local sdist installs.